Financial statements

Diluted earnings per share expands basic EPS by assuming all convertible securities, stock options, and similar instruments are exercised, increasing the denominator and potentially lowering EPS. Therefore B is correct. Choice A is a trap because it ignores these potential conversions; EPS dilution is precisely about the effect of those additional shares.

The IFRS conceptual framework prohibits LIFO because it can distort inventory valuation and profit margins; IFRS requires inventory to be measured at the lower of cost and net realizable value using FIFO or weighted‑average methods. Answer B is correct. Choice A is a trap: many students assume parity with U.S.

The fundamental accounting equation states that a company's resources (assets) are financed by creditors (liabilities) and owners' claims (equity), expressed as Assets = Liabilities + Equity. A diagram for this topic isn't available yet — the worked example below walks the same reasoning step by step.

• !Choice A is a trap: many students assume parity with U.S.
• !Choice A is a trap because it ignores these potential conversions; EPS dilution is precisely about the effect of those additional shares.
• !Choices B, C, and D describe income‑statement or balance‑sheet line items, not cash‑flow categories, so they are incorrect.
• !Internally generated brand value (A) is not recognized as goodwill, depreciation (C) and interest expense (D) relate to expense items, making those choices wrong.
• !It is incorrect to limit this metric to net income alone, as OCI bypasses the traditional income statement.

Answer each from memory — you'll see instantly whether you're right and why.

Run a focused 10-question mini-mock on Financial statements and see it stick.