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Basic Question 29 of 40
In calculating the numerator for diluted earnings per share, the interest on convertible debt is ______
B. added to earnings available to common shareholders with an adjustment for taxes.
C. subtracted from earnings available to common shareholders without an adjustment for taxes.
A. subtracted from earnings available to common shareholders with an adjustment for taxes.
B. added to earnings available to common shareholders with an adjustment for taxes.
C. subtracted from earnings available to common shareholders without an adjustment for taxes.
User Contributed Comments 3
| User | Comment |
|---|---|
| muneeb70 | Convertible debt ADDS on the net income (as company takes on the debt) but needs to be adjusted for tax before it is added. Thus, its Added. |
| nayagan | When the convertible debt is exercised, the company no longer has to make interest payments. Interest payments were included in net income, so they must be added back to earnings. Since interest is TE, added back at marginal tax rate. Yes? |
| bidisha | yes |
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Learning Outcome Statements
describe how earnings per share is calculated and calculate and interpret a company's basic and diluted earnings per share for companies with simple and complex capital structures including those with antidilutive securities
CFA® 2024 Level I Curriculum, Volume 2, Module 2.