Treasury Method Accounting

Description
The treasury stock method is used to calculate the net increase in shares outstanding if in-the-money options and warrants were to be exercised. This information is included in the calculation of diluted earnings per share, expanding the number of shares and therefore reducing the amount of earnings per share.

Key Points:

1. The treasury stock method is used to compute the number of new shares that can potentially be created by un-exercised in-the-money warrants and options.

2. The treasury stock method assumes that the proceeds that a company receives from an in-the-money option exercise are used to repurchase common shares in the market.

3. The treasury stock method must be used by a company when computing its diluted EPS.

The Treasury Method Model helps user to:

1. Calculate the proceeds received by the company from exercise of options based on the current market price (CMP), Number of Shares and Exercise Price.
2. Calculate Share Dilution based on the proceeds from share option exercise and current market price of the shares.
3. Understand and comprehend the Basic and Diluted number of shares outstanding.
4. User can than calculate various per share data like EPS, DPS , BPS, FCFF and more based on the basic and diluted number of shares outstanding. In the attached model only EPS is calculated using the both Basic and Diluted shares.