Question
A company has only common shares outstanding and no convertibles or options. Which EPS figure must it report?
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Answer
Only basic EPS.
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Question
Why is after-tax interest, not pre-tax interest, added back for convertible debt in diluted EPS?
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Answer
Because conversion would eliminate interest expense and its tax shield.
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Question
Why are stock splits and stock dividends applied retroactively in EPS calculations?
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Answer
To maintain comparability across periods.
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Question
Why does the Treasury Stock Method add only net new shares to the diluted EPS denominator?
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Answer
Because assumed exercise provides cash used to buy back some shares.
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