Earnings Per Share Quiz
8 multiple-choice questions with answers and explanations · 1 easy, 7 hard
Basic and diluted earnings per share: weighted-average shares, preference dividends, and the effect of options and convertibles.
- 1Diluted EPS — Treasury Stock MethodA company has 12,000 share options outstanding with an exercise price of $20. The average market price during the year was $30. Under the treasury stock method, the incremental shares added to the diluted EPS denominator are:hard
- 2Weighted-Average Shares OutstandingA company had 60,000 ordinary shares outstanding on January 1 and issued 12,000 additional shares for cash on July 1. The weighted-average number of shares for basic EPS is:hard
- 3Basic EPS with Cumulative Preference SharesNet income is $250,000. The company has cumulative preference shares carrying an annual dividend of $30,000 (not declared this year) and a weighted-average of 100,000 ordinary shares. Basic EPS is:hard
- 4IAS 33 — Bonus Issue and Weighted-Average SharesA company had 100,000 shares outstanding on January 1 and made a 1-for-4 bonus (scrip) issue on July 1. The weighted-average shares for basic EPS are:hard
- 5Diluted EPS — Convertible BondsNet income is $100,000 and 50,000 ordinary shares are outstanding all year. Convertible bonds carry after-tax interest of $6,000 and convert into 10,000 shares. Diluted EPS is:hard
- 6Weighted-Average Shares with a BuybackA company had 100,000 shares outstanding on January 1 and repurchased 20,000 shares on October 1. Weighted-average shares for basic EPS are:hard
- 7Why Diluted EPS Differs From Basic EPSDiluted earnings per share differs from basic EPS because diluted EPS assumes:easy
- 8Antidilutive Securities in Diluted EPSA company holds convertible preferred shares that, if converted, would INCREASE earnings per share (diluted EPS would come out higher than basic EPS). These securities are:hard