Which statement is incorrect? * A. Dilution of EPS is the decrease in EPS when convertible instruments are converted to ordinary shares B. The purpose of diluted EPS is to provide a comparison figure for creditors. C. Dilutive convertible securities must be used in the computation of diluted EPS but not in basic EPS. D. Antidilutive securities should be ignored in all EPS calculations. E. none of the above

Which statement is incorrect? * A. Dilution of EPS is the decrease in EPS when convertible instruments are converted to ordinary shares B. The purpose of diluted EPS is to provide a comparison figure for creditors. C. Dilutive convertible securities must be used in the computation of diluted EPS but not in basic EPS. D. Antidilutive securities should be ignored in all EPS calculations. E. none of the above

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 10QE

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Which statement is incorrect? * Dilution of EPS is the decrease in EPS when convertible instruments are converted to ordinary shares The purpose of diluted EPS is to provide a comparison figure for creditors. Dilutive convertible securities must be used in the computation of diluted EPS but not in basic EPS. Antidilutive securities should be ignored in all EPS calculations. none of the above
Which statement is incorrect?A. Dilution of EPS is the decrease in EPS when convertible instruments are converted to ordinary sharesB. The purpose of diluted EPS is to provide a comparison figure for creditors.C. Dilutive convertible securities must be used in the computation of diluted EPS but not in basic EPS.D. Antidilutive securities should be ignored in all EPS calculations.E. none of the above Note: EPS is Earnings Per Share
All of the following are key similarities between GAAP and IFRS with respect to accounting for dilutive securities and EPS except: a. the model for recognizing stock-based compensation. b. the calculation of basic and diluted EPS. c. the accounting for convertible debt. d. the accounting for modifications of share options, when the value increases.
Which of the following statements about convertible bonds is correct? Before conversion, convertible bonds are treated as equity because they can be potentially converted to equity shares. Holders are more likely to convert bonds to equity shares if stock price declines significantly. Upon conversion, a gain or loss will be recognized. The company who sells convertible bonds will pay interest at a lower interest rate.
Which of the following statements correctly describe characteristics of preference shares? Group of answer choices A. The required return on preference equity is expected to be less than the required return from ordinary equity. B. None of the other statements are correct C. A participating preference share participates in the interest payments paid to debtholders. D. Preference shares are called “hybrid” securities because they display characteristics of both short-term and long-term debt.
When computing diluted earnings per share (EPS), convertible bonds are:A. ignored.B. assumed converted whether they are dilutive or antidilutive.C. assumed converted only if they are antidilutive.D. assumed converted only if they are dilutive.
A convertible bond issue should be included in the diluted earnings per share computation as if the bonds had been converted into common stock, if the effect of its inclusion is Dilutive Antidilutive a. No No b. Yes No c. Yes Yes d. No Yes
Which of the following statements is true regarding diluted earnings per share? Select one: a. Contingently issuable shares are considered outstanding in the computation of diluted EPS when any conditions for issuance are currently being met. b. To incorporate convertible bonds into the calculation, the denominator of the EPS fraction is decreased by the additional common shares assumed. c. It is assumed that stock options are exercised at the beginning of the period (or at the time the options are issued, if later) and the cash proceeds received are used to buy back (as treasury stock) as many of those shares as can be acquired at the closing market price for the period. d. To incorporate convertible securities into the calculation, the numerator is decreased by the interest (after-tax) that would have been avoided in the event of conversion.
Which statement is incorrect? * Dilution is an increase in earnings per share when convertible instruments are converted to ordinary shares. Diluted EPS is required when there are potential shares outstanding. Dilutive potential shares shall be deemed to have been converted into shares at the start of the period or, if later, the date of the issue of the potential shares Options and warrants are dilutive, when they would result in the issue of shares for less than the average market price of shares during the period. none of the above
Which statement is not correct? A convertible bond is like a bond with a call option. The amount of DPS has negative impact on favorable income differential per share of a convertible bond. The value of a convertible bond cannot be less than its straight value. Exchangeable bonds give the bondholder the right to exchange the bonds for the common stock of the issuer of the bond. The conversion value of a convertible bond is directly related to its market price of common stock.
Which of the following statements is not true of the fair-value method of accounting for marketable securities? Select one: A. The investment account is recorded at current fair value on the balance sheet. B. Interim changes in the investments’ fair value may or may not affect income depending on the securities’ classification. C. This method is used when the reporting company generally owns less than 20% of the investee company. D. Dividends are treated as a return of the capital invested. E. None of the above
When dilutive convertible bonds are the only potential ordinary shares, the diluted earnings per share (EPS) will be __________if the bonds are actually converted compared to when they are not converted.A. lowerB. higherC. the sameD. incomparable