You Have Just Computed the Basic Earnings Per Share (Basic

Multiple Choice

You have just computed the basic earnings per share (basic EPS) for a company in which you hold some stock.You then find out that the company recently issued preferred stock and has included additional stock options in the compensation package for top executives that you were unaware of when you computed the basic EPS.This additional knowledge:

A) means that the basic EPS you calculated is incorrect,and the true ratio will be higher once the impact of preferred shares and stock options is included.
B) means that the basic EPS you calculated is incorrect,and the true ratio will be lower once the impact of preferred shares and stock options is included.
C) would have no impact on the value of the basic EPS calculation.
D) means that the basic EPS you calculated is incorrect,but the true value of the ratio could be either higher or lower because the use of preferred stock and the use of stock options affect the basic EPS in opposite directions.