Pick only one questions, you DO NOT have to answer both questions:
Discussion Question 1:
Lee Corporation releases its financial statements with a simple capital structure for EPS. This period has seen a significant rise in stock price, and to make more shares available at a lower price, the company has planned on a two-for-one stock split.
What effect would this have on EPS, net assets, and WASO?
Do you recommend that Lee Corporation go ahead with the two-for-one split?
Why or why not?
Discussion Question 2:
There are times when a company has a convertible security that is considered to be antidilutive.
What is the proper accounting treatment of these securities with regard to EPS calculations?
What effect do antidilutive securities have on EPS?
Do you think that they should or should not be included in the calculation of EPS?
Why or why not?
Do the antidilutive securities have an effect on the stakeholder’s perspective of the company’s financial position?
Notes from Professor:
The questions this week will give you the chance to explore more involved issues related to earnings per share. It will have a lot of focus in the world of investing business. Managers need to understand EPS and all the different ratifications.
