- CFA Exams
- 2021 CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 21. Understanding Income Statements
- Subject 7. Earnings per Share

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**CFA Practice Question**

Which of the following statements is (are) true?

II. In complex capital structures, basic EPS and diluted EPS are both calculated.

III. The purpose of dual presentation is to demonstrate the effect of any conversion on the EPS figure.

I. In simple capital structures, only basic EPS is calculated.

II. In complex capital structures, basic EPS and diluted EPS are both calculated.

III. The purpose of dual presentation is to demonstrate the effect of any conversion on the EPS figure.

Correct Answer: I, II and III

All of the statements are true. The reason for requiring the second EPS number (diluted EPS) is to demonstrate the effect of any possible conversion on EPS. The first EPS number (basic EPS) demonstrates EPS without any possible conversion as a basis for comparison.

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**User Contributed Comments**
4

User |
Comment |
---|---|

Inaganti6 |
Now only if the exam asked questions as easy as this. |

choas69 |
40 practice questions only for this LOS, if you finish the 5200 awaiting for you then you have a high chance of passing the exam and only passing. |

sjugeli |
Can we say "any conversion" when it does not demonstrate effect of antidilutive conversions? |

Konstantis |
I agree with you sjugeli |