- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 2. Analyzing Income Statements
- Subject 5. Earnings per Share
CFA Practice Question
Which of the following statements is TRUE regarding the reporting of earnings per share (EPS)?
B. Diluted EPS must be less than or equal to basic EPS.
C. Basic EPS must be less than diluted EPS.
A. Diluted EPS may be greater than basic EPS.
B. Diluted EPS must be less than or equal to basic EPS.
C. Basic EPS must be less than diluted EPS.
Correct Answer: B
Diluted EPS must be less than or equal to basic EPS.
User Contributed Comments 6
| User | Comment |
|---|---|
| kalps | If diluted EPS was equal to basic EPS then surely you would calculate it in the first place |
| synner | antidilutive securities not included in dilutive EPS, so dilutive EPS must be <= basic EPS |
| msns | As per the notes, diluted EPS is calculated only on the Income from ongoing operations which would be greater than Net Income in most cases. So in this case, doesn't option A hold good that Diluted EPS may be greater tha basic EPS |
| surob | The only time when diluted EPS could be higher than basic EPS is if securities were antidilutive, in which case it would increase EPS. However, as far as antilutive securities are not included in the computation of the basic and dilutive EPS, Basic EPS must be higher or equal to dilutive EPS. Hope this helps |
| RCapistrano | Dilutive EPS means that the new value of the EPS is lower after options have been exercised. But if the new EPS value is equal to the basic EPS value, where is the dilutive effect on that? |
| tybe0012 | EPS**** |