When a company's only potential common shares are convertible bonds:
A) Diluted EPS will be greater if the bonds are actually converted than if they are not converted.
B) Diluted EPS will be smaller if the bonds are actually converted than if the bonds are not converted.
C) Diluted EPS will be the same whether or not the bonds are converted.
D) The effect of conversion on diluted EPS cannot be determined without additional information.

Question

Quizplus · Accepted Answer

The Answer of When a company's only potential common shares are convertible bonds:
A) Diluted EPS will be greater if the bonds are actually converted than if they are not converted.
B) Diluted EPS will be smaller if the bonds are actually converted than if the bonds are not converted.
C) Diluted EPS will be the same whether or not the bonds are converted.
D) The effect of conversion on diluted EPS cannot be determined without additional information.

When a Company's Only Potential Common Shares Are Convertible Bonds