Which of the following is always true: Diluted weighted shares is always less than or equal...

Which of the following is always true:

Diluted weighted shares is always less than or equal to basic weighted average shares
Diluted weighted shares is always greater than or equal to basic weighted average shares
Shares outstanding on the period end date is the value used to calculate Basic EPS
Shares outstanding on the period end date is the value used to calculate Diluted EPS

Solutions

Expert Solution

Diluted weighted shares is always greater than or equal to basic weighted average shares

Dilutive EPS= Net income /Weighted avg no. of shares outstanding considering the effect of dilutive stocks

As per FASB, Codification Topic 260 (FASB
ASC 260), companies are required to report Diluted EPS using the "Treasury Stock Method"which requires the following assumptions:
a) Put options shall be assumed to have been exercsed at the beginning of the period ,
b) the proceeds from exercise of the Put options assumed to be used by the company to repurchase all
of those issued shares at the average market price during the period , and
3) the incremental shares (difference between the number of shares assumed issued and the number
of shares assumed purchased) to be included in the denomiNetor of the Diluted EPS

Accordingly, Dilutive weighted shares will always be greater than or equal to basic weighted avg shares.

ekkarill92 answered 1 year ago

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