Answer-first summary for fast verification
Answer: Had outstanding stock options at the end of the year.
**Explanation:** - **Option A is incorrect** because a stock split or stock dividend requires retroactive adjustment to the number of shares outstanding at the beginning of the period. Consequently, the denominator for both basic and diluted EPS would be the same. - **Option B is correct** because the exercise of stock options does not affect net income (the numerator). However, it increases the denominator by the incremental shares issued upon exercise, leading to different denominators for basic and diluted EPS. - **Option C is incorrect** because convertible debt impacts both the numerator (adjusted for after-tax interest) and the denominator (additional shares from conversion), resulting in changes to both components.
Author: LeetQuiz Editorial Team
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When calculating basic and diluted earnings per share (EPS), if the numerators remain identical but the denominators differ, the company most likely:
A
Executed a stock split during the year.
B
Had outstanding stock options at the end of the year.
C
Had outstanding convertible debt at the end of the year.
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