DILUTED EARNINGS PER SHARE
D
A written put options is a contract that required an entity to repurchase its own ordinary shares at a specified price. Which of the following statements is incorrect if the written put options are "in the money"? A. It is assumed that at the beginning of the period sufficient ordinary shares will be issued at the average market price to raise the proceeds to satisfy the contract B. It is assumed that the proceeds from the issue are used to buy back the ordinary shares covered by the written put options C. The resulting incremental ordinary shares shall be included in computing diluted earnings per share D. The resulting incremental ordinary shares shall be included in computing basic earnings per share
A
All of the following must be disclosed in relation to earnings per share except A. Forecast earnings per share for the following year B. Instruments that could could potentially dilute basic earnings per share in the future but not included in the diluted EPS because they are antidilutive in the current period C. The weighted average number of ordinary shares used D. The earnings figures used in calculating EPS
A
An entity already has calculated the basic earnings per share. In determining diluted earnings per share, the annual dividend on convertible cumulative preference share which is dilutive should be A. Added back to the numerator of basic EPS whether declared or not B. Deducted from the numerator of basic EPS only if declared C. Added back to the numerator of basic EPS only if declared D. Deducted from the numerator of basic EPS whether deeclared or not
D
Antidilutive securities A. Should be included in the computation of diluted earnings per share but not basic earnings per share B. Are those whose inclusion in earnings per share computation would cause basic earnings per share to exceed diluted earnings per share C. Include share options and warrants whose option price is less than the average market price D. Should be disregarded in all EPS computations
C
Dilution of EPS is defined as A. Decrease in earnings per share when any financial instrument is converted to any form of share capital B. Decrease in share capital C. Decrease in earnings per share when convertible instruments are converted to ordinary shares D. Decrease in earnings per share when share capital is converted t debt capital
A
For an entity having several different issues of convertible securities, share options and warrants, the standard requires selection of the combination of securities producing A. The lowest possible earnings per share B. The highest possible earnings per share C. The earnings per share figure midway between the lowest possible and the highest possible earnings per share D. Any earnings per share figure between the lowest possible and the highest possible earnings per share
C
How will the annual interest or preference dividend affect annual net earnings available to ordinary shareholders each year? A. Annual net earnings available to ordinary shareholders are reduced by annual interest but not by preference dividends B. Annual net earnings available to ordinary shareholders are reduced by preference dividends but not by annual interest C. Annual net earnings available to ordinary shareholders are reduced by both annual interest and preference dividends D. Annual net earnings available to ordinary shareholders are not reduced by annual interest or preference dividends
A
If a share option is converted on March 31 A. The potential ordinary shares are included in diluted EPS up to March 31, and in basic EPS from the date converted to the year-end both weighted accordingly B. The ordinary shares are not included in diluted EPS C. The ordinary shares are not included in basic EPS D. The effects of the share option are included only in previous year's PS calculation
C
In calculating diluted earnings per share, which of the following should not be considered? A. The weighted average number of ordinary shares outstanding B. The amount of dividends declared on cumulative preference shares C. The amount of cash dividends declared on ordinary shares D. The number of ordinary shares resulting from the assumed conversion of bonds payable outstanding
B
In calculating whether potential ordinary shares are dilutive, the profit figure used as the "control number" is A. Net profit after tax including discontinued operations B. Net profit from continuing operations C. Net profit before tax including discontinued operations D. Retained profit for the year after dividends
A
In computing diluted EPS, dividends on convertible cumulattive preference shares should be A. Ignored B. Deducted from net income, whether declared or not C. Deducted from net income only when declared D. Added to net income net of tax
B
In determining diluted earnings per share, interest expense net of the income tax, on dilutive convertible bond payable should be A. Added back to weighted average shares outstanding for diluted earnings per share B. Added back to net income for diluted earnings per share C. Deducted from net income for diluted earnings per share D. Deducted from weighted average shares outstanding for diluted earnings per share
A
Options and warrants are dilutive if A. The exercise price is lower than the average market price B. The exercise price is higher than the average market price C. The exercise price is equal to the average market price D. The option shares represent 20% of the ordinary shares actually outstanding
A
Potential ordinary shares include all of the following, except A. Financial liabilities or equity instruments that are nonconvertible into ordinary shares B. Share warrants C. Share option or employee plans that allow employees to receive ordinary shares as part of their remuneration D. Shares which would be issued upon the satisfaction of certain conditions resulting from contractual arrangements, such as purchase of a business
A
The "if converted" method of computing earnings per share assumes conversion of convertible bonds payable and convertible preference shares at the A. Beginning of the earliest period reported or at time of issuance if later B. Beginning of the earliest period reported regardless of time of issuance C. Middle of the earliest period reported regardless of the time issuance D. Ending of the earliest period reported regardless of the time of issuance
C
The nature of diluted earnings per share involving adjustment for share options can be described as A. Historical because earnings are historical B. Historical because it indicates an entity's valuation C. Proforma because it indicates potential changes in number of shares D. Proforma because it indicates potential changes in earnings
D
The purpose of diluted earnings per share is to A. Provide a comparison figure for debt holders B. Indicate earnings shareholders shall receive in future periods C. Distinguish between entities with a complex capital structure and entities with a simple capital structure D. Show the maximum possible dilution of earnings
B
When applying the treasury share method for diluted earnings per share, the market price of the ordinary share used for the assumed acquisition of treasury shares is the A. Market price at the end of the year B. Average market price during the year C. Market price at the beginning of the year D. Average market price over a two-year period
D
When there are multiple dilutive convertible securities , the one that should be used first to calculate dilutive earnings per share is the security with the A. Largest earnings adjustment B. Largest earnings per share adjustment C. Smallest earnings adjustment D. Smallest earnings per share adjustment
C
Which of the following statement is correct in relation to earnings per share? A. If preference share is outstanding, dividend declared on the preference share is always deducted from net income in calculating EPS B. EPS can never be negative C. If income from continuing operations is less than zero, potentially dilutive securities are antidilutive D. All issues convertible to ordinary shares must be included in the calculation of diluted EPS
