In calculating earning per share,stock options warrants,and rights are
A) always dilutive.
B) never dilutive.
C) dilutive if the exercise price is less than the average market price of the common stock.
D) dilutive if the exercise price is more than the average market price of the common stock.

Question

Quizplus · Accepted Answer

Stock options, warrants, and rights are considered dilutive if the exercise price is less than the average market price of the common stock. This is because if the exercise price is less than the average market price, it means that the holder of the option, warrant or right can purchase the stock at a lower price than what the market is currently trading it for. This increases the number of shares outstanding and hence dilutes the earnings per share.

In Calculating Earning Per Share,stock Options Warrants,and Rights Are