CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

In calculating earnings per share, the equivalent number of convertible preferred shares are added as an adjustment to the denominator (number of shares outstanding). If the preferred shares are cumulative, which amount should then be added as an adjustment to the numerator (net earnings)?
A. Annual preferred dividend
B. Annual preferred dividend times (one minus the income tax rate)
C. Annual preferred dividend times the income tax rate
Explanation: Taxes are ignored when calculating EPS.

User Contributed Comments 2

User Comment
eboyd Why aren't preferred dividends subtracted from net income in this question?
Allen88 Because if the convertible preferred is converted, then no preferred dividends are distributed.
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