INTERMEDIATE ACCOUNTING (LL)-W/ACCESS
INTERMEDIATE ACCOUNTING (LL)-W/ACCESS
17th Edition
ISBN: 9781119598565
Author: Kieso
Publisher: WILEY
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Chapter 16, Problem 1Q
To determine

Dilutive securities: Dilutive securities are securities which do not take the form of common stock. The owner is allowed to obtain the common stock either on conversion or on exercise.

To determine the meaning of dilutive security.

Expert Solution & Answer
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Explanation of Solution

The following securities are dilutive:

  • Convertible debt.
  • Stock options.

The above-mentioned securities are termed as dilutive as there is ability for the holders of securities to become common shareholders. Warrants and convertible preferred stock are examples of dilutive securities.

The weighted number of shares outstanding increase because of dilutive securities. This means that the issue of common shares will reduce the earnings per share. This reduction in the earnings is known as dilution.

Conclusion

The meaning of dilutive security is explained above.

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Earnings per share (EPS), basic and diluted; Author: Bionic Turtle;https://www.youtube.com/watch?v=i2IJTpvZmH4;License: Standard Youtube License