In Applying the Treasury Stock Method to Determine the Dilutive

question 35

Multiple Choice

In applying the treasury stock method to determine the dilutive effect of stock options and warrants, the proceeds assumed to be received upon exercise of the options and warrants

• A) are used to calculate the number of common shares repurchased at the average market price, when computing diluted earnings per share.
• B) are added, net of tax, to the numerator of the calculation for diluted earnings per share.
• C) are disregarded in the computation of earnings per share if the exercise price of the options and warrants is less than the ending market price of common stock.
• D) none of these.

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Definitions:

Conditioning

A process of behavior modification in which a response becomes more frequent or more predictable in a given environment due to reinforcement.

Sensitization

The process whereby a repeated administration of a stimulus results in the progressive amplification of a response.

Operant Conditioning

An educational method where the intensity of an action is altered through either rewards or penalties.

Associative Learning

Learning that involves forming connections between stimuli and behavioral responses, enabling organisms to predict outcomes based on their environment.