A company reports basic earnings per share of $5.00 per share. The company has convertible preferred stock that can be converted into common stock. What will diluted earnings per share equal?
A)$5.00 per share
B)more than $5.00 per share
C)less than $5.00 per share
D)There is not enough information

Question

Quizplus · Accepted Answer

Diluted earnings per share will be less than basic earnings per share if the convertible preferred stock is converted into common stock, as it increases the number of shares outstanding, thus reducing the earnings per share.

A Company Reports Basic Earnings Per Share of $5