When calculating diluted earnings per share, stock options:
A) Are included if they are antidilutive.
B) Should be ignored.
C) Are included if they are dilutive.
D) Increase the numerator while not affecting the denominator.

Question

Quizplus · Accepted Answer

Stock options are included in diluted earnings per share calculation if they are dilutive, meaning if their exercise price is lower than the market price of the stock. This is because if these options are exercised, it will increase the number of shares outstanding and reduce earnings per share. If the options are not dilutive, they are ignored for the diluted earnings per share calculation.

When Calculating Diluted Earnings Per Share, Stock Options