The main purpose of reporting diluted earnings per share is to
A) provide a comparison figure for debt holders.
B) indicate earnings shareholders will receive in future periods.
C) distinguish between companies with a complex capital structure and companies with a simple capital structure.
D) show the maximum possible dilution of earnings.

Question

Quizplus · Accepted Answer

The main purpose of reporting diluted earnings per share is to show the maximum possible dilution of earnings. This helps investors understand the potential impact of dilutive securities, such as stock options or convertible bonds, on earnings per share if they were to be exercised or converted.

The Main Purpose of Reporting Diluted Earnings Per Share Is