When a Company's Only Potential Common Shares Are Convertible Bonds

question 111

Multiple Choice

When a company's only potential common shares are convertible bonds:

• A) Diluted EPS will be greater if the bonds are actually converted than if they are not converted.
• B) Diluted EPS will be smaller if the bonds are actually converted than if the bonds are not converted.
• C) Diluted EPS will be the same whether or not the bonds are converted.
• D) The effect of conversion on diluted EPS cannot be determined without additional information.

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