When we take into account the dilutive effect of stock options, rights, and warrants in the calculation of EPS, the method used is called the:A. Optional method. B. If converted method. C. Dilution method. D. Treasury stock method.

Question

Ibrahim Bartlett

Business

18 October, 11:27

When we take into account the dilutive effect of stock options, rights, and warrants in the calculation of EPS, the method used is called the:A. Optional method. B. If converted method. C. Dilution method. D. Treasury stock method.

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Answers (1)

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Quinton Berry · Answer 1

Answer: D. Treasury stock method

Explanation: Treasury stock method is the technique adopted by companies used to calculate the number of shares that will be newly created from outstandings in the money warrant. The net increase gotten from this technique (treasury stock method) is added to determine the diluted EPS (earnings per share). The money gotten from this is reinvested through the repurchase of shares in the shares market.

Formula for treasury stock method is

Net increase = shares from treasury stock method - shares repurchased