The assumed conversion of convertible debt and preferred stock in diluted earnings per share calculations affects

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The assumed conversion of convertible debt and preferred stock in diluted earnings per share calculations affects both the numerator and denominator. The assumption is that such securities are converted into common shares, which increases the number of outstanding shares (denominator) and decreases the net income available to common shareholders (numerator). Therefore, both the numerator and denominator are affected, resulting in a lower diluted earnings per share.

The Assumed Conversion of Convertible Debt and Preferred Stock in Diluted