Question

In the determination of the diluted earnings per share, convertible securities are

included if they are antidilutive.

included whether they are dilutive or not.

not included.

included if they are dilutive.

Answer 1

Convertible securities are generally considered while computing Diluted earnings per share. In case if convertible securities are anti-dilutive then such security is not considered in the computation of diluted earnings per share.

Anti-dilutive securities means, Securities which are not in common stock form but if they are converted into the common stock, it would result in an increase in the earnings per share.

simple terms: If inclusion of convertible security increases the diluted earnings per share and which is greater than the basic earnings per share then the security is said to be anti-dilutive. then in that case such security is not considered in the computation of EPS.

Diluted EPS > Basic EPS, then convertible security is said to be anti-dilutive.

Included if they are dilutive.

Option '4' is correct