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When several types of potential common shares exist, the one that enters the computation of diluted EPS first is the one with the:A. Highest incremental effect.B. Higher numerator.C. Median incremental effect.D. Lowest incremental effect.

Respuesta :

Answer:

When several types of potential common shares exist, the one that enters the computation of diluted EPS first is the one with the:

D. Lowest incremental effect

Explanation:

Diluted EPS:

Diluted EPS is known as diluted earning per share which is a method that is used to measure the determine the earning of business per share when all the convertible securities are used.

  • Convertible securities are the simply those securities which include, warrants, convertible bonds etc.

The formula for calculating diluted EPS is as follow:

Diluted EPS = (Net income - Preferred dividend) / (convertible securities +   Outstanding shares)

  • So, the option d is correct as in the computation of diluted EPS, lowest incremental effect comes first.

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