This can be expressed in terms of the following formula: If the capital structure changes (i.e. the number of shares changes) during the reporting period, a weighted average number of equity shares is used to for the calculations of EPS. The diluted earning per share (Diluted EPS) ...
Investors purchase the stocks of a company to earn dividends and sell the stocks in the future at higher prices. The earning capability of a company determines the dividend payments and the value of its stocks in the market. Hence, the earnings per share (EPS) figure is very important for ...
Before moving directly to diluted EPS (Earning Per Share), it is important to understand its basics. The increase or addition of shareholders of the company leads to dilution of rights and shares of existing shareholders. This dilution may result from issuing new capital, conversion of preferred ...
Dilutive shares impact the earning of the individual share as the company’s capital increases with the issuance of new shares while the individual holding percentage decreases. Hence, the EPS of the individual gets adversely affected. Along with EPS, the Price-earnings ratio is affected as the ...