1. What is the purpose of calculating diluted EPS? 2. Explain the difference between dilutive and anti-dilutive elements. 3. What is added to the numerator of diluted EPS for convertible bonds? For convertible preferred shares? 4. Assume basic EPS is $5. Two potentially dilutive elements exist, with an individual effect of $1 and $4.50, respectively. Under what circumstances would the $4.50 item be considered anti-dilutive? 5. How do actual conversions of senior securities affect the calculation of diluted EPS? 6. What assumption is made regarding the proceeds of option contracts when calculating diluted EPS? When are options dilutive?

1. What is the purpose of calculating diluted EPS? 2. Explain the difference between dilutive and anti-dilutive elements. 3. What is added to the numerator of diluted EPS for convertible bonds? For convertible preferred shares? 4. Assume basic EPS is $5. Two potentially dilutive elements exist, with an individual effect of $1 and $4.50, respectively. Under what circumstances would the $4.50 item be considered anti-dilutive? 5. How do actual conversions of senior securities affect the calculation of diluted EPS? 6. What assumption is made regarding the proceeds of option contracts when calculating diluted EPS? When are options dilutive