What is diluted EPS? in finance what is the use of diluted
EPS?
Answer Posted / richa
Remember that earnings per share is calculated by dividing
the company's profit by the number of shares outstanding.
Warrants, stock options, convertible preferred shares, etc.
all serve to increasing the number of shares outstanding. As
a shareholder, this is a bad thing. If the denominator in
the equation (shares outstanding) is larger, the earnings
per share is reduced (the same profit figure is used in the
numerator).
This is a conservative metric because it indicates somewhat
of a worst-case scenario. On one hand, everyone holding
options, warrants, convertible preferred shares, etc. is
unlikely convert their shares all at once. At the same time,
if things go well, there is a good chance that all options
and convertibles will be converted into common stock. A big
difference in a company's EPS and diluted EPS can indicate
high potential dilution for the company's shares, an
attribute almost unanimously ostracized by analysts and
investors alike.
Is This Answer Correct ? | 48 Yes | 4 No |
Post New Answer View All Answers
What Is Consumer Bank?
Is California Chapter 7 (straight Bankruptcy) Bankruptcy Right For Me?
How will you define Retail Banking?
Can you suggest me some good reference books on ADR/GDR/IDR which covers history, objectives, problems, theory and workings of GDR.
What is NABARD and its functions?
How Will The Stress Test Results Be Factored Into The Srep?
What is third party Insurance?
Which banks give preference to nbet candidates?
Walk me through the major line items on a Cash Flow statement.
Why you quite your job in six months??
Difference between Check and Draft ?
Highlight various skill development schemes recently started in india.
Do you have any idea about various codes used in banking industry?
How many associate SBI have?
Explain share capital and reserves and surpluses.