header bg


Which of the following statements about dilutive securities is most accurate?

A A dilutive security is one that will cause earnings per share to decrease if it is converted into common stock.

Securities that can be converted to common stock are said to be dilutive to earnings if conversion would result in lower earnings per share. A simple capital structure has only common stock or only common stock and nonconvertible stock. It contains no securities that could ever become or create common stock, even antidiludve ones. Whether warrants are antidilutive depends on the average stock price over the reporting period, not the value at the reporting date.