# Diluted Earnings Per Share (Diluted EPS) Definition and Formula.

Diluted earnings per share (diluted EPS) is a measure of a company's profit that takes into account the dilutive effect of stock options, warrants, and convertible securities. Diluted EPS is calculated by dividing the company's net income by the weighted average number of shares outstanding, including dilutive securities.

Dilutive securities are those that have the potential to convert into common shares and increase the number of outstanding shares. Stock options, warrants, and convertible securities are all examples of dilutive securities.

The diluted EPS formula is:

Diluted EPS = (Net Income - Diluted Securities Expense) / Weighted Average Shares Outstanding

The diluted securities expense is the expense that would be incurred if all of the dilutive securities were converted into common shares.

The weighted average shares outstanding includes both common shares and dilutive securities.

Diluted EPS is a measure of a company's profit that takes into account the dilutive effect of stock options, warrants, and convertible securities. In other words, it is a measure of a company's profit that reflects the potential dilution of earnings that could occur if all dilutive securities were exercised or converted.

The diluted EPS formula is:

Diluted EPS = (Net Income - Diluted Securities Expense) / Weighted Average Shares Outstanding

The diluted securities expense is the expense that would be incurred if all of the dilutive securities were converted into common shares. This expense is also sometimes referred to as the "if-converted" expense.

The weighted average shares outstanding includes both common shares and dilutive securities.

Diluted EPS is generally lower than basic EPS because the dilutive securities expense reduces net income. However, if the exercise price of the dilutive securities is higher than the average market price of the common shares, then the dilutive securities expense will be offset by an increase in the number of shares

#### How is equity value calculated?

The equity value of a company is calculated by subtracting the company's total liabilities from its total assets. This calculation is sometimes referred to as the "net worth" of a company.

The total assets of a company can be found on its balance sheet, while the total liabilities are listed on the company's liabilities and equity section of its balance sheet.

### What is a good EPS?

There is no one-size-fits-all answer to this question, as the EPS (earnings per share) figure can vary depending on the specific company and industry. However, as a general rule of thumb, a "good" EPS figure is typically one that is above the average for the company's sector. For example, if the average EPS figure for companies in the same sector as XYZ Corp is \$1.00, then XYZ Corp would be considered to have a good EPS figure if it is above \$1.00.

##### What is diluted earnings per share example?

Diluted earnings per share (EPS) is a measure of a company's profitability that takes into account the dilutive effect of outstanding options and Convertible securities.

For example, assume a company has 1 million shares of common stock outstanding and 100,000 options and convertible securities outstanding. The company reports net income of \$10 million. The diluted EPS would be \$9.09 ((10 million - 0.10 million) / (1 million + 100,000)). What is diluted EPS definition? Diluted EPS is a measure of a company's earnings per share that takes into account the potentially dilutive effects of convertible securities. Convertible securities include convertible bonds and convertible preferred shares, which can be converted into common shares. The diluted EPS figure is usually lower than the company's basic EPS figure, which excludes the effects of dilutive securities.

### Why do companies dilute shares?

There are many reasons why companies dilute shares. One common reason is to raise capital. By issuing new shares, the company can raise money to invest in new projects, expand its business, or pay off debt.

Another reason why companies dilute shares is to compensate employees with stock options. When employees exercise their options, they need to purchase shares from the company. To ensure that there are enough shares available, the company may need to dilute its existing shareholders by issuing new shares.

Finally, companies may also dilute shares to prevent a hostile takeover. By issuing new shares, the company can make it more difficult for an unwelcome acquirer to gain control of the company.