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Question 1

what is the basic EPS formula?

Answer 1

income avail. to common SH
/ WACSO

• numerator = NI - PD
• WACSO formula includes shares sold in a time-weighed basis, , +/- stock div’s and reverse splits

Question 2

what are the potential dilutive sec’s?

Answer 2

• convertible sec’s (PS, conv bonds, etc)
• warrants and other options
• contracts that can be settled in cash/stock

contingent shares

(it takes 1 of these to be called complex structure)

Question 3

what is the formula for dilution fom SO’s, warrants, and their equiv’s?

Answer 3

• NC to numerator

- add'l shares =
#sh's - [(#sh*EP)/MP]

(if EP > MP, it is anti-dilutive)

Question 4

what is the formula for dilution from conv. bonds?

Answer 4

• add int exp saved, net to numerator
  [int exp*(1-tax)]
• add #sh’s converted to WACSO

*do not include results if
anti-dilutive

Question 5

how is conv. PS in dilution calc’d?

Answer 5

• do not include PD for numerator
• add # sh’s converted to CS

*remember rule of
anti-dilution

Question 6

are CF’s per share reported?

Answer 6

they should not be reported

Question 7

are contingent shares that are dilutive included in the calc. of basic EPS?

Answer 7

yes, if all cond’s for issuance are met

*conversion of pref’d shares can be included in basic EPS

Question 8

what are some examples of cont. sh’s?

Answer 8

shares issuable upon:

• issuance of a patent
• passage of a specific period of time
• achieving a specific NI target

Question 9

Does prior year EPS need to be adj’d for stock splits and div’s?

Answer 9

yes, they do

retroactive adj.

Question 10

should the numerator in basic EPS include deductions of div’s declared in the period on non-cumu. PS (regardless of pmt) and div’s accu’d in period on cumu PS (regardless of declaration)?

Answer 10

yes, they should include both deductions

Question 11

what do CFO, CFI, and CFF include?

Answer 11

• CFO = OA and OL
  (day-to-day business)
• CFI = CR + CD of non-CA’s
• CFF = CR + CD from
  D (non-CL) and E

Question 12

how are bank overdrafts treated?

Answer 12

• GAAP = CFF

- IFRS = CFF or CFO if integral part of business

Question 13

what is the diff. b/w direct and indirect method of presentation of CF’s?

Answer 13

• only diff. is CFO
• direct = cash rec’d - cash paid

..if direct is chosen, 1st suppl sched must show reconc. of CFO

• indirect (reconc)
  = NI+Dep.+losses-gains

..if indirect is chosen, must show IT paid and int paid as 1st suppl sched

Question 14

how is CFO under direct method calc’d?

Answer 14

• use accrual –> cash
  (1) find cash rec’d from cust’s
  (2) cash int rec’d
  (3) cash div rec’d
  (4) CR of ins. proceeds + law settlements
  (5) cash rec’d from sale of trading sec’s class’d as CA
  (6) cash paid to supp’s/emp’s
  (7) int paid
  (8) IT paid
  (9) cash paid to acq. trading sec’s if class’d as CA
  (10) other op. cash pmt’s (SGA)

Question 15

how is CFO calc’d under indirect method?

Answer 15

NI
\+dep/amort
\+losses/IL
-gains/amort. bond prem
- equity earnings
- (+/-) change OA (inv, A/R, TS, PPD exp)
\+ (+/-) change OL (DTL)
---------------------------------------
= CFO

Question 16

what are investing act’s?

Answer 16

• purch/sale of FA’s
• purch/sale of TS’s
  (AFS, HTM, non-CA TS)
• purchasing CS from another entity (investment in “x”) under acq. method
• collection of N/R from related party
• purch of LTD

Question 17

what are financing act’s?

Answer 17

• issuing D/E
• “P” pmt
• repurch of TS
• pmt of div’s

Question 18

what are some noncash investing and fin. act’s?

req’s suppl. disclosure

Answer 18

• purch of FA by issuing stock (lower I, higher F)
• conversion of bonds to E
• acq’ing A’s thru cap lease obl.
• exch of 1 noncash asset for another
• retiring FA
  JE: Dr: AD
  Cr: HC

Question 19

should conversion of D -> E be disclosed as supply. info in statement of CF’s?

Answer 19

yes, it should

Question 20

how do we calc. for redemption of B/P?

Answer 20

BB + issuance of bonds - EB

= redemption of B/P

Question 21

does CFO - DE - IL on GW = NI?

Answer 21

yes, it does