Question

=====An employee will generally exercise stock options only when the current market price is above the exercise price of the option. true or false.

====== When computing diluted​ EPS, both the numerator and denominator are affected by​ ________.

r convertible bond-----prefered stock-------stock warrant or stock option.

====Treasury shares reduce the number of shares​ ________.

A. issued B. outstanding C. available D. authorized

===========There is a gain on early retirement of bonds if the retirement price is greater than the net carrying value. true and false

========A technical default occurs when a debtor misses interest​ and/or principal payments. true or false ..

Answer 1

>>An employee will generally exercise stock options only when the current market price is above the exercise price of the option.

Ans: True,

Employee will generally exercise stock options only when the current market price is above the exercise price of the option. Because through exercising they can earn profit. If the market price is below the exercise price, they can buy it from open market.

>> When computing diluted EPS, both the numerator and denominator are affected by​

Ans: convertible bond

In the given list only affect the diluted EPS, both the numerator and denominator is convertible bond. If we convert the bond, we need not pay the interest and it is also give to share holders, so should add after tax interest amount with Income available to share holders on numerator side. On denominator side, increased number of converted share from bond are added to weighted average number of common share outstanding.

In the case of preferred stock, it is not convertible so doesn’t affect the D EPS calculation

In the case of stock warrant or stock option, it only affect the denominator of the D EPS calculation. Because, the effect from option and warrant are occurred only in weighted average number of common share outstanding through new issue of common share regarding option and warrant.

>>Treasury shares reduce the number of shares​

Ans: B. outstanding

Treasury shares are the shares which are bought back by the issuing company from open market for retirement or further issuance or other options or warrants , so it reducing the number of shares outstanding on the open market.

>>There is a gain on early retirement of bonds if the retirement price is greater than the net carrying value.

For the issuing company The statement is False,

If the retirement price is greater than the net carrying value, for issuing company record a loss from retiring bond. In other words, If the price paid to retire the bonds is greater the carrying amount of bonds the company needs to record a loss on retirement.

For opposite party it is True

>>A technical default occurs when a debtor misses interest and/or principal payments.

Ans: True

Because, Default is the failure to repay a debt including interest or principal on a loan. A default can occur when a borrower is unable to make timely payments, misses payments, or avoids or stops making payments. So the given statement is correct.