When evaluating whether to calculate diluted earnings per share (EPS),a company issuing convertible notes should consider:
A) the time weighting factor
B) if the notes potentially convert to ordinary shares
C) if conversion of the notes is likely to increase earnings, or decrease losses, per share
D) both B and C must be considered

Question

Quizplus · Accepted Answer

When evaluating whether to calculate diluted earnings per share, a company issuing convertible notes must consider both B and C. This is because convertible notes have the potential to convert into ordinary shares, which would affect the company's EPS calculation. Additionally, the conversion of the notes may have an impact on the company's earnings, increasing it or decreasing losses per share. Therefore, both factors should be taken into account when determining whether to calculate diluted EPS. The time weighting factor is not directly relevant in this context.

When Evaluating Whether to Calculate Diluted Earnings Per Share (EPS),a