Which statement is correct?
A)Diluted EPS will always be less than basic EPS.
B)Diluted EPS will always be greater than basic EPS.
C)Diluted EPS will always be equal to EPS.
D)Diluted EPS will be less than or equal to basic EPS.

Question

Quizplus · Accepted Answer

Diluted EPS takes into account the potential dilution of outstanding stock options, warrants and convertible securities. It assumes that these securities have been converted into common stock, increasing the number of outstanding shares. As a result, diluted EPS is always less than or equal to basic EPS, which is calculated by dividing net income by the current number of outstanding shares without considering the dilutive effects. Therefore, D is the correct answer.

Which Statement Is Correct