Example of Weighted Average Number of Shares

Example of Weighted Average Number of Shares

Weighted average number of shares is an important element while calculating the earning per share. It is important to remember that it earning per share is calculated by divided the ordinary profit with weighted number of shares outstanding during the year. The weighted average number is calculated to recognize the additional resources add in during the year.

Pro rat Bases: The weighted number of shares is calculated by simple pro rata bases as explained below.

Issue shares 1 Jan ,2014	500,000
Further issue 01 April,2014	300,000
Further Issue Oct, 2014	300,000
Calculate weighted Average number of Share	?

Solution

Period from	Period to	Months Outstanding	Factor	Shares Outstanding	Weighted Average Outstanding Shares
01.Jan,2014	01.Apri,2014	3 Months	3/12	500,000	125,000*
01.April,2014	01.Oct,2014	9 Months	9/12	800,000	600,000
01.Oct,2014	31 Dec,2014	3 months	3/12	1,100,000	275,000

Total Average of outstanding Shares during the year

1,000,000

=3/12*500,000

=125,000 shares