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18 July, 23:21

When several types of potential common shares exist, the one that enters the computation of diluted EPS first is the one with the:A. Highest incremental effect. B. Higher numerator. C. Median incremental effect. D. Lowest incremental effect.

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  1. 18 July, 23:39
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    When several types of potential common shares exist, the one that enters the computation of diluted EPS first is the one with the:

    D. Lowest incremental effect

    Explanation:

    Diluted EPS:

    Diluted EPS is known as diluted earning per share which is a method that is used to measure the determine the earning of business per share when all the convertible securities are used.

    Convertible securities are the simply those securities which include, warrants, convertible bonds etc.

    The formula for calculating diluted EPS is as follow:

    Diluted EPS = (Net income - Preferred dividend) / (convertible securities + Outstanding shares)

    So, the option d is correct as in the computation of diluted EPS, lowest incremental effect comes first.
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Home » Business » When several types of potential common shares exist, the one that enters the computation of diluted EPS first is the one with the:A. Highest incremental effect. B. Higher numerator. C. Median incremental effect. D. Lowest incremental effect.
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