[DocJ]

This has been bugging me for months now, my brain just ain’t taking it in.

Now I know what Diluted EPS is, it’s basically just EPS plus “potential” Common Stock, like what if you converted all convertible shares or warrants or whatever else to Common Stock. And I know the formula for Basic EPS is (Net Income – Pref Dividends) / Weighted Avg Common Shares Outstanding.

But…HOW THE HECK DO YOU CALCULATE DILUTED EPS!?

[AndreA]

It's not that difficult, just take your time and try to understand every step (what will effect the numerator and denominator).

[fassopony]

With Farhat-

[lfranc8]

Watch the EPS plus video in the dojo! It’s the best I couldn’t figure it out either and the videos are totally worth it. Now i never get it wrong!!!

[bigstakk]

I wouldn’t worry too much about that topic if you’re having trouble with it. There are other topics that you should focus heavily on at the end of the day.

[Mujahid_ Abu Dahda]

You are required to calculate diluted EPS when you have issues like: convertible bonds (into common stock), stock warrant/stock options etc. Just like @AndreA said, both the Net income and the no. of shares will be affected as a result of these issues mentioned above i.e interest savings, additional shares etc. While the basic EPS will remain totally unaffected by these diluted factors, taking the basic EPS a step further is dilution. Hence Diluted EPS!
Take note: sometimes these issues (convt bonds, options etc) are included in questions (especially BEC) and you wo will be asked to calculate the Basic EPS and vice versa. Know that the basic EPS is unaffected!
Hope this helps!

[Author]

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