Under Which of the Following Situations Would the Potential Ordinary

question 25

Multiple Choice

Under which of the following situations would the potential ordinary shares be included in the calculation of diluted earnings per share?

• A) Conversion of the potential ordinary shares would increase the loss from continuing ordinary operations per share.
• B) Conversion of the potential ordinary shares would increase earnings per share.
• C) Earnings per incremental share are greater than basic earnings per share.
• D) Out-of-the money options.
• E) None of the given answers.

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Definitions:

Proprietorship

A form of business organization where a single individual owns and operates the business.

Liabilities

Financial obligations or debts owed by a business to another entity, payable in money, goods, or services.

Notes Payable

Refers to promissory notes a company issues, promising to pay a specific amount of money at a future date.

Salaries

Regular payments made to employees for their services, often expressed as an annual amount but payable in smaller increments such as monthly or biweekly.