Question
The 2016 Form 10-K of NetFlix includes the following footnoted information. Use this information to answer the required. The computation of net income per share
The 2016 Form 10-K of NetFlix includes the following footnoted information. Use this information to answer the required.
The computation of net income per share is as follows:
Year ended December 31, |
2016 | 2015 | 2014 |
(in thousands, except per share data) |
Basic earnings per share: |
Net income | $ | 186,678 | $ | 122,641 | $ | 266,799 |
Shares used in computation: |
Weighted-average common shares outstanding | 428,822 | 425,889 | 420,544 |
Diluted earnings per share: |
Net income | $ | 186,678 | $ | 122,641 | $ | 266,799 |
Shares used in computation: |
Weighted-average common shares outstanding | 428,822 | 425,889 | 420,544 | ||||
Employee stock options | 9,830 | 10,567 | 11,350 |
Weighted-average number of shares | 438,652 | 436,456 | 431,894 |
Employee stock options with exercise prices greater than the average market price of the common stock were excluded from the diluted calculation as their inclusion would have been anti-dilutive.
The following table summarizes the potential common shares excluded from the diluted calculation (in thousands):
2016 | 2015 | 2014 |
Year ended December 31, | (in thousands) |
Employee stock options | 1,545 | 517 | 917 |
Required:
a. | What are the potential sources of dilution of NetFlix’s earnings per share? |
b. | List two additional dilutive securities (other than those NetFlix includes). |
c. | NetFlix did not include all outstanding employee stock options in the calculation of diluted net income per share in 2016? Why not? How many options were excluded? |
d. | Calculate basic EPS for each of the three years. |
e. | Calculate diluted EPS for each of the three years. |
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