How Do Outstanding Subsidiary Stock Warrants Affect the Calculation of Consolidated

question 42

Multiple Choice

How do outstanding subsidiary stock warrants affect the calculation of consolidated earnings per share?

• A) They will be included in both basic and diluted earnings per share if they are dilutive.
• B) They will only be included in diluted earnings per share if they are dilutive.
• C) They will only be included in basic earnings per share if they are dilutive.
• D) Only the warrants owned by the parent company affect consolidated earnings per share.
• E) Because the warrants are for subsidiary shares, there will be no effect on consolidated earnings per share.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of the consumer increases, and vice versa.

Optimal Consumption

The combination of goods and services that provides the highest level of satisfaction to an individual, given their income and the prices of those goods and services.

Prices Constant

An assumption in economic analysis that prices remain unchanged over a specific period, allowing for the examination of other variables' effects without price fluctuations.

Diminishing Marginal Rate

The principle that as the quantidade of a variable input increases, with all other inputs fixed, a point will be reached where the additions to output will begin to decrease.