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Hello Mike
I am in the final stages of revision and I have stumbled across something which is causing stress!
What is the approach to a rights issue of shares in the cash flow statement? I would assume that the way we calculate rights issues in cash flows is similar to EPS?
I know the T-accounts for when there is a bonus issue of shares but is there a different approach to rights shares?
I have not seen a cash flow question so far involving a rights issue within a cash flow statement, so here’s hoping that you can provide an answer to my dilemma!!
Avnish
No cash movement for a BONUS issue
For a rights issue the question will give you the movement in the share capital account and the share premium account and will tell you the terms of the issue.
Work out how many shares were issued under the rights (not necessarily the same as the movement in share capital (there could have been a bonus issue as well)), multiply by the exercise price and there’s the cash flow from the rights issue
Is that better?
Hi Mike
That makes a bit more sense!
Just the last paragraph of your explanation…
Is that the same as an EPS working for a rights issue?Avnish
The working in a rights issue situation is to find the rights fraction
The post above is to work out the cash flows on a rights issue.
Not quite the same!
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