Reading 32: Understanding the Income Statement - LOS i ～ Q

答案和详解如下：

41．The primary difference between basic EPS and diluted EPS is that:

A)   proprietors and partners report basic EPS but corporations report diluted EPS.

B)   small firms report basic EPS but large firms (over $100 million in sales) must report diluted EPS.

C)   diluted EPS includes the potential effects of convertible securities while basic EPS does not.

D)   extraordinary items and discontinued operations are omitted from basic EPS but included in diluted EPS.

The correct answer was C)    

The primary difference between basic EPS and diluted EPS is that diluted EPS includes the potential effects of convertible securities while basic EPS does not.

42．When calculating earnings per share (EPS) for firms with complex capital structures, convertible preferred stock is ordinarily considered to be a:

A)   non-equity security.

B)   antidilutive security.

C)   contingent equity security.

D)   potentially dilutive security.

The correct answer was D)

Dilutive securities are securities that decrease EPS if they are exercised or converted to common stock. Stock options, warrants, convertible debt, and convertible preferred stock are examples of potentially dilutive securities. Note that if diluted EPS when considering the convertible preferred stock is greater than basic EPS, the convertible preferred stock would be antidilutive and should not be treated as common stock in computing diluted EPS.

43．When calculating earnings per share (EPS) for firms with complex capital structures, convertible bonds are ordinarily considered to be:

A)   antidilutive securities.

B)   potentially dilutive securities.

C)   nonlinear debt securities.

D)   embedded debt securities.

The correct answer was B)

Dilutive securities are securities that decrease EPS if they are exercised or converted to common stock. Stock options, warrants, convertible debt, and convertible preferred stock are examples of potentially dilutive securities. Note that if diluted EPS when considering the convertible bonds is greater than basic EPS, the convertible bonds would be antidilutive and should not be treated as common stock in computing diluted EPS.

44．When calculating earnings per share (EPS) for firms with complex capital structures, stock options are ordinarily considered to be:

A)   derivative securities.

B)   embedded securities.

C)   antidilutive securities.

D)   potentially dilutive securities.

The correct answer was D)    

Dilutive securities are securities that decrease EPS if they are exercised or converted to common stock. When the exercise price is less than the average market price, stock options are considered to be dilutive, Stock options, warrants, convertible debt, and convertible preferred stock are examples of potentially dilutive securities.

45．Examples of potentially dilutive securities include all of the following EXCEPT:

A)   convertible preferred stock.

B)   warrants.

C)   options.

D)   non-convertible bonds.

The correct answer was D)    

Preferred stock and bonds are only considered to be potentially dilutive if they are convertible. Warrants and options are always considered to be potentially dilutive.