Question

In the diluted earnings per share computation, the treasury stock method is used for options and warrants to reflect assumed reacquisition of common stock at the average market price during the period. If the exercise price of the options or warrants exceeds the average market price, the computation would:

Answer 1

Answer:

be antidilutive

Explanation:

The term antidilutive securities refers to financial instruments that are not in the form of common stock, but when converted into common stock will increase earnings per share.

A transaction can have an antidilutive effect on the earnings per share calculation if the proportional increase to the number of shares outstanding is smaller than the proportional increase to earnings

In the diluted earnings per share computation, the treasury stock method is used for options and warrants to reflect assumed reacquisition of common stock at the average market price during the period. If the exercise price of the options or warrants exceeds the average market price, the computation would BE ANTIDILUTIVE.

Antidilutive is a term that describes the effects of certain actions, such as securities retirement, securities conversion, or other corporate actions for example, acquisitions made through the issuance of common stock or other securities on the earnings per share (EPS) or voting power of existing shareholders.