weighted avg nr of shares with stock divi

[archived_user]

Hi guys
Just wondering if you think the below answer to the QBank question makes sense or if this is a mistake? I can’t see why it’s not 101k (90*0.25 +108*0.5 + 98*0.25)
[Question and answer removed by admin]
Thanks

 

[archived_user]

The question and answer were deleted, but concerning stock dividends: say 10% stock dividend is issued on July 1st. For your computation, simply increase shares outstanding by 10% for all prior months (up till January 1st).

 

[archived_user]

Oops wasn’t aware I shouldn’t post qbank questions.. won’t do that again Thanks Moonborne, indeed didn’t realise stock you adjust previous months for stock divi although it makes total sense since it’s the same thing as a stock split.
The investopedia explanation for stock dividend has the most hilarious wording ever.
“ Companies may decide to distribute this type of dividend to shareholders of record if the company’s availability of liquid cash is in short supply. “
Can just picture the board meeting where the cfo highlights they’re short on cash for the dividend and a wizard comes up with the solution. “I’ve got a really good idea about that dividend the shareholders wanted guys, they’ll totally fall for this one…”

 

[archived_user]

I wrote an article on WACSO that covers this in detail, with timelines and colored shares of stock and everything: http://www.financialexamhelp123.com/weighted-average-common-shares-outst....
(Full disclosure: as of 4/25/16 there is a subscription fee to access the articles; free sample articles are available here: http://www.financialexamhelp123.com/sample-articles/.)