Which Statement Is Correct About the "Income Effect" on EPS

question 98

Multiple Choice

Which statement is correct about the "income effect" on EPS?

• A)This is the incremental before-tax income available to ordinary shareholders.
• B)This is the incremental after-tax income available to ordinary shareholders.
• C)This is the incremental number of ordinary shares outstanding before conversion.
• D)This is the incremental number of ordinary shares outstanding after conversion.

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Definitions:

Long-Term Note Payable

A loan or debt with a repayment period that extends beyond one year, often used for significant business investments.

Mortgage Payable

A long-term liability representing borrowed funds secured by the pledge of property, to be repaid within a specified period.

Installment Payment

A method of paying for goods or services over a period of time in regular, scheduled payments.

Straight-Line Method

A depreciation method that allocates an equal amount of depreciation each year over the useful life of the asset.