In what situation would a company have to calculate and report diluted EPS on the financial statements?

Question

Quizplus · Accepted Answer

A company would have to calculate and report diluted EPS on the financial statements if it has potentially dilutive securities, such as convertible preferred or convertible debt or stock options, that could decrease the earnings per share of common stock. Nonconvertible preferred stock would not be considered potentially dilutive, so C is not correct. The fair market value of a company's common shares is not a factor in calculating diluted EPS, so B is not correct. A company with only common shares issued and outstanding would not need to calculate and report diluted EPS, so D is not correct.

In What Situation Would a Company Have to Calculate and Report