Question

Class, indicate which of the following answers to the statement below represents the best choice, then support your view. If another student has already answered the question and you agree, then indicate why one of the other choices is incorrect.

With respect to the computation of earninqs per share,which of the following would be most indicative of a simple capital structure?

A.        Common stock, preferred stock and convertible debt outstanding

B.        Common stock, convertible preferred stock, and and debt outstanding.

C.        Common stock, preferred stock, and debt outstanding.

D.        Common stock, preferred stock, and stock options outstandin

Answer 1

The correct answer for the question is Option C -  Common stock, preferred stock, and debt outstanding. While Common stock and preferred stock represent the ownership interests within the company, the debt outstanding is the amount owed by the business to its creditors. These 3 together would be the most indicative of a simple capital structure of a company.

Option A is incorrect as Convertible Debt Outstanding is incorect as it is not a part of the simple capital structure.

Option B is incorrect as Convertible preferred stock is not part of a simple capital structure.

Option D is incorrect as Stock Options Outstanding is not essentially a part of the simple capital structure.

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