When We Take into Account the Dilutive Effect of Stock

question 113

Multiple Choice

When we take into account the dilutive effect of stock options, rights, and warrants in the calculation of EPS, the method used is called the:

• A) Optional method.
• B) If converted method.
• C) Dilution method.
• D) Treasury stock method.

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Definitions:

Expenses

Outflows or other uses of assets or incurrences of liabilities during a period from delivering goods, rendering services, or carrying out other activities.

Proprietorship

A business structure owned by a single individual who is responsible for its liabilities and entitled to its profits.

CPA

Certified Public Accountant, a designation awarded to individuals who pass an examination and meet certain education and experience requirements in the field of accounting.

Equities

Financial instruments representing ownership interest in a company, commonly referred to as stocks, which entitle the holder to a share of the company's earnings and assets.