Diluted Earnings Per Share Is a Hypothetical Computation to Warn

question 123

Multiple Choice

Diluted earnings per share is a hypothetical computation to warn stockholders what could happen if:

• A)Loss contingencies turn out adversely.
• B)Convertible securities are converted into shares of common stock.
• C)Extraordinary losses were to recur.
• D)Consideration was given to the loss from operations discontinued during the current period.

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Definitions:

Net Income

The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue.

Administrative Expense Budget

A forecast of future administrative costs, including expenses related to management, general office functions, and other non-production costs.

Selling Expense

Costs associated with the distribution, marketing, and sale of a product or service, including advertising, sales commissions, and retail space rental.

Depreciation

The systematic allocation of the cost of a physical asset over its expected useful life.