Which statement is correct about the "income effect" on EPS?
A)This is the incremental before-tax income available to ordinary shareholders.
B)This is the incremental after-tax income available to ordinary shareholders.
C)This is the incremental number of ordinary shares outstanding before conversion.
D)This is the incremental number of ordinary shares outstanding after conversion.

Question

Quizplus · Accepted Answer

The income effect on EPS refers to the incremental after-tax income available to ordinary shareholders. This concept is crucial in understanding how certain financial decisions, such as issuing convertible securities or options, can impact the earnings per share (EPS) by altering the amount of income that is available to be distributed among the existing shares.

Which Statement Is Correct About the "Income Effect" on EPS