For full text article go to : http://www.educorporatebridge.com/accounting/eps-and-diluted-eps Confused between EPS and Diluted EPS? Don’t worry ! Learn in and out of EPS and Diluted EPS .This article explains meaning of EPS and Diluted EPS with suitable examples.

3. • It helps to investors to understand return on their
investment in stock of a publicly traded firm.
• It tells investors how much they have earned on their stock
in the company on a share price basis.
• EPS can be calculated simply by dividing net income earned
in a given reporting period less preferred dividend by the
total number of shares outstanding during the same period.

4. The EPS is calculated by dividing net income less preference
dividends divided by the number of outstanding equity shares.
This can be expressed in terms of the following formula:
Earnings per share =
(Net income – Preference Dividends)
Weighted average common share outstanding

5. What is meant by
Weighted average common
share outstanding

6. • Simply it means the amount of shares outstanding in a
company will often change due to a company issuing new
shares, buybacks of existing shares, and other financial
instruments such as ESOP converted into the shares.
• This method incorporates any changes in the amount of
outstanding shares over a particular reporting period.
• It is an extremely important number; it is useful to
calculate key financial measures such as EPS for the time
period.

8. • Dilution is the reduction in EPS if the securities potentially
convertible into common stock .
• In simple words we can say that Diluted EPS is a
performance indicator used to measure the quality of a
company's earnings per share (EPS) if all convertible
securities like options, warrants, convertible preferred
shares etc. were exercised.
• Diluted EPS gives the worst scenario for earnings per share

9. Formula for the calculation of Diluted EPS
(Net income –pref. dividends) + (Convertible Debt interest) * (1- Tax rate)
weighted average common shares outstanding + shares
from conversion of convertible debt)

10. For more Information
Please click on given link
http://www.educorporatebridge.com/accounting/eps-and-diluted-eps

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