The Calculation of Diluted Earnings Per Share Assumes That Stock

question 167

Multiple Choice

The calculation of diluted earnings per share assumes that stock options were exercised and that the proceeds were used to:

• A) Buy common stock as an investment.
• B) Retire preferred stock.
• C) Buy treasury stock.
• D) Increase net income.

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Definitions:

Safety Stocks

An inventory management method aimed at preventing stockouts by maintaining a predefined level of extra stock for products.

Forecast Error

The difference between predicted outcomes and actual events, often analyzed in business and economics to improve forecasting techniques and accuracy.

Stockout

A situation where demand cannot be fulfilled due to the unavailability of the product, often leading to lost sales.