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Question on adjustment of pre opening expense on diluted normalized EPS

Cell F87 of diluted normalized EPS $0.94 is after adjusting for pre-opening expense of $15,999. Since this not a one-off item and it was added back on the pre tax adjustment in cell F78, then the normalized diluted EPS is not $0.94 right? It should be: $0.94 + 15.999*0.6/491.717 = $0.95 (using dilu... Read More

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by Elvina J.

added 6 years ago

Adjusting Diluted shares for convertible bonds

This topic requires clarification and an exercise

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by Christian C.

added 10 years ago

Complex Trading: Diluted s/out for preferred/convertibles?

Hi,

Will there be an explanation regarding getting diluted s/out when there are options, preferreds, and convertibles? How should we calculate these - is there a shortcut formula like the treasury option method? How are warrants related?

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by Guest 1.

added 10 years ago

RE: Complex Trading: Diluted s/out for preferred/convertibles?

Ok. I've viewed the complex trading comps on convertibles. From what I understand, if market value of equity (if converted) exceeds the face value (at maturity), they would convert, and vice versa. But I believe I've heard (I may be wrong) that convertibles may also have "price at conversion" ... Read More

by Guest 1.

added 10 years ago

Complex Trading Comps Analysis: COST Inputs

Hi, (1). Sorry, but I still don’t see logic and consistence in the converts explanation. We are analyzing the convertibility of the security as of TODAY, and in my view, and as also expressed in a previous post here, as of TODAY, it is in-the-money, and as such, should assume conversion (as the... Hi,

(1). Sorry, but I still don’t see logic and consistence in the converts explanation. We are analyzing the convertibility of the security as of TODAY, and in my view, and as also expressed in a previous post here, as of TODAY, it is in-the-money, and as such, should assume conversion (as the basic rule for dilutive securities). So, WST argues that if the maturity was tomorrow or the share price drops tomorrow a investor would not convert – but for me, in essence, it is a subjective thinking (one cannot be imagining if something was tomorrow what would have happened…) We are analyzing it as of TODAY and have to decide to convert it or not based on what we have TODAY (Present Value and current share price).

(2). So, repeating the question of a previous post (that I’m not sure was answered in full), why is the future value (i.e., face value) of convertibles compared to the market value of shares? (since we actually need to compare Present Value vs. Present Value and Future Value vs. Future Value)?

(3). Independently of the different points of view, what should we consider in terms of numbers, to decide if it is in-the-money or out-the-money: PV of Convertibles (as stated on BS) vs. market value of equivalent shares, or Face Value of Convertibles (the FV/par value) vs. market value of equivalent shares?

(4). If converted, the adjustments would be:

A. Reduce debt by the amount stated on the BS (PV of face value)
B. Increase book value of equity by the equivalent number of shares converted x current stock price
C. Add the equivalent number of shares to the basic shares Outstanding

Am I missing any adjustment here?

(5). Also, Could you please confirm if the new book value of equity should be increased by the amount of book value of the convertible bonds (now excluded from debt on the BS) or by the market value of the equivalent number of shares (current stock price x equivalent number of shares that were converted)?

(6). Sorry, but in the previous answer WST mentioned that “what costco shares suddenly dropped the next day? then it is suddenly out of the money and one wouldn't convert;” – it is the sane thing for options – one can wait and decide to convert the options until it expires because may believe the share price can go up. And anyway we convert it, because our analysis is as of TODAY and does not include the subjective factor of thinking in the “timing” of this and that. It seems to me by assuming this for the converts, we are adopting two different criteria for the same thing. Does that make sense for you guys?

I appreciate your help in these questions.
Thanks again.

Cheers. Read More

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by Guest 1.

added 10 years ago

RE: Complex Trading Comps Analysis: COST Inputs

1) You helped our argument for us - because this is subjective, you CANNOT introduce (well we'll try not to introduce) subjectivity. Who is to argue what direction the stock price will take? WMT's stock price was in a $45-$50 band for 8 years, so who's to say that suddenly COST or anyone's stock pri... Read More

by WST Expert 1.

added 10 years ago

Interest expense on Converts

If we did not adjust for the dilutive effect of convertible notes, shouldn't we had to adjust the numerator of the diluted EPS since this is calculated assuming the notes were converted and as such the interest expense on converts was added back to NI (as per p.25 on COSTCO's 10Q)? I appreciate y... Read More

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by Guest 1.

added 10 years ago

Accounting changes

Hi there,

What is the decision rule to adjust financials for changes in accounting policies? Because for some companies we adjusted (like COSTCO) but for others we didn't. So, when do we have to adjust and when not?

Thanks for your help.

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by Guest 1.

added 10 years ago

RE: Accounting changes

First of all, Changes in Accounting Principles that are below Net Income or Income from Continuing Operations never get touched. Second, again, use judgement - will this occur again in the future? For instance, don't make adjustments for SBC - Stock Based Compensation b/c that is a new pronouncem... Read More

by WST Expert 1.

added 10 years ago

Complex Trading Comps Analysis: Convertibles of COSTCO

Why we are not considering the $22 conversion price? I might be confused about the characteristics of convertible bond. Just to make it clear: Isn't it the case that the holder of the convertible bond/note, in case of conversion gives up his/her claim on the face value in exchange of the ... Read More

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by Guest 1.

added 10 years ago

RE: Complex Trading Comps Analysis: Convertibles of COSTCO

My first question is about COSTCO's convertibles. I was familiar with "if converted method" to measure the potential dilutive effects of potential dilution from CFA curriculum. The explanation given in the lecture was quite different. In the video, it was explained that whenever the face valu... Read More

by Guest 1.

added 10 years ago

RE: Complex Trading Comps Analysis: Convertibles of COSTCO

1) Per the instruction in the video, it clearly stipulates that the key question in the costco converts rests on the timing - how long away is the maturity of the converts? if it matures tomorrow, the holder wouldn't convert b/c they can get more by simply holding to maturity and receiving par value... Read More

by WST Expert 1.

added 10 years ago