CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

Which of the following is true about diluted earnings per share?

I. It is often referred to as pro forma calculations
II. It is computed as if convertible preferred stock has been converted
III. It is used to compute the price-earnings ratio
IV. It represents a hypothetical case
A. All of these statements are true.
B. I, II and IV
C. II only
Explanation: Diluted earnings per share are often called pro forma calculations, are computed as if convertible preferred stock has been converted, and represent a hypothetical case.

User Contributed Comments 6

User Comment
myanmar is computed as if convertible COMMON stock has been convertet, isn't it?
kenanand P/E ratio is Price/EPS. So, what is wrong in the statement that EPS is used to compute PE ratio? (or is that only basic EPS is used in the calculation of P/E ratio?)
julamo only the basic EPS is used to calculate the P/E ratio.
cong III is wrong unless you want to compute diluted P/E
Jurrens myanmar: convertible preferred becomes common... it's preferred that's convertible to common
thanhb91 Can someone please explain for me why it is called "pro forma" EPS??
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