Stocks play a significant part in our economy. For many investors, stock splits seem to be too great of deal. Everyone loves a good deal. It is a Buy One Get One stock or more for free deal for the investors. Stocks can split into any ratios, but the most common ratio is 2-for-1, 3-for-1, and 3-for-2. Splits of 4-for-3, 5-for-2, and 5-for-4 have been offered to the investors in the past. Recently, Apple (AAPL) surprised content investors by declaring a massive 1-for-7 stock split and announcing a big second quarter earnings. Apple has split stocks four times since trading publicly. Apple's common stock split on a 2-for-1 basis on May 15, 1987, on June 21, 2000 and again on February 18, 2005 (Apple, 2014).
The stock split is simple. You have a $100 bill in your wallet, but you decide to carry five $20 bills instead because of the popularity of smaller $20 bill instead of a large $100 bill.
For transaction below, if you owned 10 million shares of XYZ Corporation at $10 per share initially, and the corporation offers a 2-1 stock split, upon the split you would own 20 shares worth $5 each. For the same concept, you would owe 30 million of $3.33 per share for a 3-for-1 split, and for a 3-for-2 split, you would owe 15 million of $6.66 per share.
Pre-Split Post-Split
2-for1
# of Shares 10M 20M
Share Price $10 $5
Market Cap $100M $100M
3-for-1
# of Shares 10M 30M
Share Price $10 $3.33
Market Cap $100M $100M
3-for-2
# of Shares 10M 15M
Share Price $10 $6.66
Market Cap $100M $100M
Why do companies issue splits if there is no increase or decrease to capitalization? What kind of financial impacts do the stock splits cause to the companies and investors?
First, the stock splits have greater psychological...
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... from http://www.apple.com/pr/library/2014/04/23Apple-Expands-Capital-Return-Program-to-Over-130- Billion.html
BRK/B:New York Stock Quote. (n.d.). Bloomberg.com. Retrieved April 28, 2014, from http://www.bloomberg.com/quote/BRK/B:US Hamburg, M. (2010, January 10). Berkshire Hathaway Inc. Shareholders Approve 50-for-1 Split of Its Class B Common Stock. . Retrieved April 26, 2014, from http://www.berkshirehathaway.com/news/JAN2010.pdf
Spiceland, J. D., & Sepe, J. F. (2013). Intermediate accounting (7th ed.). New York: McGraw-
Hill/Irwin, 1106-1108.
Smart, S. B., & Megginson, W. L. (2009). Introduction to financial management (2nd ed.). Australia:
South-Western Cengage Learning, 573-574.
Understanding Stock Splits. (2013, November 19). Investopedia. Retrieved April 28, 2014, from
http://www.investopedia.com/articles/01/072501.asp
This narrative is to document the process to record equity in the financial statements. Gibson Energy ULC currently is not a publicly traded corporation and is a wholly owned subsidiary of Gibson Energy Holding ULC who is an indirect wholly owned subsidiary of R/C Guitar Cooperatief U.A., a Dutch co-op owned by investment funds affiliated with Riverstone Holdings LLC. As a result, the risks associated with recording share activity is low due to limited transactions and the process to record Share Capital is covered under the sub-process ‘Journal Entries’ documented in the Corporate Reporting Process Narrative. This narrative is focussed on Contributed Surplus, which currently is an Equity Incentive Plan (Stock based compensation).
Bear Stearns went from a market value of billions to being worth $2 a share in a few weeks. They would have been acquired for that very price if a legal screw up did not force their acquirers to up their ante to $10 per share. The mighty can fall quick but lawyers will make money either way even if they screw up.
The first financial ratio of the analysis is the Price to Earnings ratio (“P/E ratio”). The ratio is computed by dividing the price of one share of common stock, by the earnings per share of common stock. This analysis uses diluted earnings per share which assumes the issuance of new stock for all existing stock options. Also, the price of the stock was computed as an average of the fourth quarter high and low stock prices published in the 10K report of each company, because the year end stock prices were not listed for all the companies. Because the P/E ratio measures the relative costliness of different stocks, in relation to their income, it provides a useful place to begin the analysis.
...ion issuable shares of Class A stock, with 322 million of them currently being issues. This equates to $32 million from the Class A stock. The Class B stock also has 900 million issuable shares, and only 70 million issued, equating for $7 million. Finally, the accumulated comprehensive loss and treasury stock equate for losses of $108 million and $1.02 billion respectively.
During this period something known as the New York Stock Exchange arose that allowed even the most common person to invest in the huge corporations that ruled America’s industries. This market seemed very promising to many people and was growing faster than anyone could have imagined. In 1925 the value of all stocks in the NYSE were at about 27$ billion, but in only 4
The company went public in 1980 by offering 4.6 million shares at $22/per share. The shares sold out almost immediately and generated more capital than any IPO since Ford Motor Company in 1956. Apple is considered the world’s largest information technology company by revenue. In February of 2015, Apple was the first U.S. corporation to be valued at over $700 billion. During the years of 1985-1996, Apple suffered with low revenue and also low share interest. After Steve Jobs came back on the job as CEO, Apple jumped back by introducing key Apple products which in the long run made Apple what it used to be, the number one company to sell new and improved technology. Apple’s stock has had four different stock splits, but the stock has gone up close to 30,000%! It is definitely a stock that is volatile to the global news and market but in the long run it is also a stock that is good for the portfolio because of its
...equity depends on profitability, activity and financial leverage (Spiceland, Sepe, and Nelson 258-264). Apple, along with its competitors, are easily analyzed by investors and owners through the Dupont analysis and other activity ratios while also bringing to light the construed formulas Apple uses.
Lastly, Apple’s stock sells at 15230.83 times one year’s earnings compared to Microsoft selling at 38.82 times. This ratio tells investors how much they will to pay for every dollar of a company’s earnings. As a result, Apple has a higher ratio, signifying that a higher price/earnings ratio, a higher return on investment (Miller-Nobles, Mattison and Matsumura 670).
In this report, we will analyze the financial performance of two companies: Kraft and General Mills. They are global consumer foods companies that develop different packaged food products. The main goals of these companies are to meet consumers’ needs and preferences while generating superior returns by delivering consistent growth in sales and earnings, coupled with an attractive dividend yield. This report shows how each company meets their goals and which one is in better standing.
Marshall, M.H., McManus, W.W., Viele, V.F. (2003). Accounting: What the Numbers Mean. 6th ed. New York: McGraw-Hill Companies.
money as the value of the shares was not worth a lot now. So they
Howells, Peter., Bain, Keith 2000, Financial Markets and Institutions, 3rd edn, Henry King Ltd., Great Britain.
Apple Inc.’s Financial Analysis case study will cover the nine-step assessment process to evaluate the company’s future financial health. The nine-step evaluation process will entail the following: 1) Fundamental analysis covers objectives, plan of action, market, competing technology, and governing and operational traits, 2) Fundamental analysis-revenue direction, 3) Investments to support the firm’s entities action plan, 4) Forthcoming profit and competitive accomplishment, 5) Forthcoming external financial requirements, 6) Accessibility to direct at sources of external finance, 7) Sustainability of the 3-5 year plan, 8) Strain examination beneath scenarios of calamity, and 9) Present financial plan (State University, 2013). The fundamental analysis will be explained primarily in the next section.
Block, S. B., & Hirt, G. A. (2005). Foundations of financial management. (11th ed.). New York: McGraw-Hill.
What does the accountant of the future need to be successful? A sturdy education that while is based on traditional accounting practices, also prepares future accountants for the plethora of changes happening in the accounting universe. Frequently, most of the institutions responsible for educating professionals fail to evolve as rapidly as the professional practice itself (Bedford et al. 4). In every way, accounting is expanding and in order for the future to have competent accountants, accounting education must expand as well. Major changes occurring in the world of accounting include the expansion of services and products, changes in competition, an increase in specialization, and an increase in and an advancement of technology. It is up to academic institutions to find proactive ways in which to prepare students for such changes. Accounting education of the future will require more breadth to cover the inevitable expansion of services and products, increased knowledge of economics, marketing, management and information systems to increase competitive advantage, a balanced course load that provides a general accounting knowledge as well as increased knowledge of a specialization, and also a greater, proactive focus on the use of continuously advancing accounting technologies (Bedford et al. 8). Also in play is the chance of change in accounting standards, the move from US GAAP to IFRS. While there are no certainties surrounding the threat of such change, students in the U.S. should acquire at least a general, basic feel for the practices used in regards to IFRS. The future health of the accounting profession depends, to a great extent, on the health of our students (Gormon and Hargadon 4). Reorganization of curriculums would surely be difficult and assumedly time-consuming, but nevertheless, completely