Computation of Basic EPS: True Statements | CFA Level 1 Exam Prep

True Statements About Computation of Basic EPS

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Question

Which of the following is/are true about computation of Basic EPS?

I. Reacquired shares are excluded from the date of acquisition.

II. Shares issued in the purchase of assets are assumed to have been outstanding for the entire period.

III. Shares issued in mergers are assumed to have been outstanding from the date of issuance.

Answers

Explanations

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A. B. C. D.

A

Weighted average shares used in EPS computations are calculated using the following rules:

1. Reacquired shares are excluded from the date of acquisition.

2. Shares issued in the purchase of assets are included from the date of issuance.

3. Shares issued in mergers are assumed to have been outstanding for all periods for which EPS numbers are presented.

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