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Convertible preference shares are ANTI-dilutive when:
ABasic EPS is positive
BThe conversion is voluntary
CDividend per share on the preference shares (per ordinary share obtainable on conversion) EXCEEDS basic EPS from continuing operations
DPreference shares are classified as equity
Answer & Solution
Correct answer: C. Dividend per share on the preference shares (per ordinary share obtainable on conversion) EXCEEDS basic EPS from continuing operations
Each potential ordinary share class is tested individually. If converting would INCREASE EPS (the dividend foregone per converted share > basic EPS), the conversion is anti-dilutive and excluded from diluted EPS.
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