Answer:
When several types of potential common shares exist, the one that enters the computation of diluted EPS first is the one with the:
D. Lowest incremental effect
Step-by-step explanation:
Diluted EPS:
Diluted EPS is known as diluted earning per share which is a method that is used to measure the determine the earning of business per share when all the convertible securities are used.
- Convertible securities are the simply those securities which include, warrants, convertible bonds etc.
The formula for calculating diluted EPS is as follow:
Diluted EPS = (Net income - Preferred dividend) / (convertible securities + Outstanding shares)
- So, the option d is correct as in the computation of diluted EPS, lowest incremental effect comes first.