When we take into account the dilutive effect of convertible securities in the calculation of EPS, the method used is called the:
A) Treasury stock method.
B) If converted method.
C) Optional method.
D) Dilution method.

Question

Quizplus · Accepted Answer

When calculating the dilutive effect of convertible securities on EPS, the method used is called the If-Converted Method. This method assumes that the convertible securities are converted into common stock at the beginning of the reporting period, and the calculation is done based on this assumption. The other options (Treasury stock method, Optional method, Dilution method) are not methods used in the calculation of EPS with convertible securities.

When We Take into Account the Dilutive Effect of Convertible