1. Knowledge Check 01 Which of the following statements about antidilutive securities and their effect on EPS are true? (Select all that apply.)

Check All That Apply

• Dilutive securities are ignored when calculating both basic and diluted EPS.

• It is not immediately obvious whether the effect of the conversion of a particular convertible security would be dilutive or antidilutive.

• If the effect of the conversion or exercise of potential common shares would be to increase EPS, the related securities are referred to as antidilutive securities.

• To determine whether convertible securities are dilutive, we can compare the incremental effect of the conversion (expressed as a fraction) with the EPS fraction before the effect of any convertible security is considered.

2. Knowledge Check 01 Which of the following statements about disclosures relating to EPS are true? (Select all that apply.)

Check All That Apply

• A reconciliation is required of the numerator and denominator used in the basic EPS computations to the numerator and the denominator used in the diluted EPS computations.

• Any adjustments to the numerator for preferred dividends must be disclosed.

• Any potential common shares that werent included because they were dilutive must be disclosed.

• Any transactions that occurred before the end of the most recent period that would materially affect earnings per share.