In computing diluted earnings per share, the treasury stock method is used for:
A) Stock warrants.
B) Stock splits.
C) Reverse stock splits.
D) Convertible preferred stock.

Question

Quizplus · Accepted Answer

The treasury stock method is used for stock warrants because it assumes that the proceeds from the exercise of warrants are used to buy back shares at the average market price, thus diluting the earnings per share.

In Computing Diluted Earnings Per Share, the Treasury Stock Method