- CFA Exams
- CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 21. Understanding Income Statements
- Subject 7. Earnings per Share
CFA Practice Question
Which of the following statements regarding basic and diluted EPS is (are) FALSE?
II. A simple capital structure contains no potentially dilutive securities.
III. Dilutive securities decrease EPS if they are exercised or converted to common stock.
IV. When using the treasury stock method, always use average price rather than ending share price.
I. Antidilutive securities decrease EPS if they are exercised or converted.
II. A simple capital structure contains no potentially dilutive securities.
III. Dilutive securities decrease EPS if they are exercised or converted to common stock.
IV. When using the treasury stock method, always use average price rather than ending share price.
A. I only
B. I and III
C. II, III and IV
Explanation: Antidilutive securities increase EPS if exercised or converted to common stock.
User Contributed Comments 3
| User | Comment |
|---|---|
| myanmar | dilutive sec. decreases eps while antidilutive sec. increases eps, right? |
| prachirp | very much |
| neokamjain | dilutive sec. does not necessarily decrease EPS... it can increase too depending on its impact on earnings and equity. I think option 3 is ambigious. |