stock split

CFA Level I Equities
#1

A recent question asked to calculate the weighted number of shares for the fictional life of a company. About 7 months into the year, the stock split 2x1, say from 200,000 to 400,000. The final answer to the question was 400,000, and ignored the initial 7 months of the year.

The reaon given in the answer to the question is as follows:

“Stock split is treated retroactively to the start of the year”. Is this correct? I.e. if a stock splits, and no other actions occur fot the remainder of the year, the weighting for the months prior to the split no longer apply?

Thanks!

#2

This is correct.

I wrote an article on WACSO that covers this (in color, no less!): http://financialexamhelp123.com/weighted-average-common-shares-outstanding-wacso/