Financial Statement Analysis
 Ratio Analysis of Financial Statements (Formula, Types, Excel)
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 Ratio Analysis
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 Liquidity
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 Cash Conversion Cycle
 Cash Conversion Cycle (CCC) Formula
 Fixed Asset Turnover Ratio Formula
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 Profitability Ratios
 Profitability Ratios Formula
 Common Size Income Statement
 Vertical Analysis of Income Statement
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 Degree of Operating Leverage Formula (DOL)
 NOPAT Formula
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 Earnings Per Share
 Basic EPS
 Diluted EPS
 Basic EPS vs Diluted EPS
 Return on Equity (ROE)
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 Return on Investment Formula (ROI)
 ROIC vs ROCE
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 Capital employed Employed
 Return on Average Assets (ROAA)
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 Return on Assets Formula
 Return on Equity Formula
 DuPont Formula
 Net Interest Margin Formula
 Earnings Per Share Formula
 Diluted EPS Formula
 Contribution Margin Formula
 Unit Contribution Margin
 Revenue Per Employee Ratio
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 EBIT vs EBITDA
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 Tax Equivalent Yield
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 Operating Expense Ratio Formula
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 Debt to Equity Ratio
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 Debt to Income Ratio Formula (DTI)
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 DSCR Formula (Debt service coverage ratio)
 Financial Leverage Ratio
 Financial Leverage Formula
 Degree of Financial Leverage Formula
 Net Debt Formula
 Leverage Ratios
 Leverage Ratios Formula
 Operating Leverage vs Financial Leverage
 Current Yield
 Debt Yield Ratio
 Solvency Ratio Formula
Diluted EPS Formula
In simple terms, Diluted Earnings per Share EPS (DPS) are a measurement of profit. For Diluted EPS calculation, you need to pay heed to a lot of items together.
Let’s have a look at the formula of diluted earnings per share –
From the abovediluted earnings per share formula, you can understand you need to look at the entire balance sheet and the income statement Diluted EPS Calculation.
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Example of Diluted Earnings per Share Formula
Let’s take an example for Diluted EPS Calculation.
Good Inc. has the following information in the year end 2017 –
 Net Income: $450,000
 Common Shares Outstanding: 50,000
 Preferred Stock Dividend: $50,000
 Unexercised Employee Stock Options: 5000
 Convertible Preferred Stocks: 23,000
 Convertible Debt: 10,000
 Warrants: 2000
Calculate basic earnings per share and the DPS
All information is given in the example above. We will put it in the diluted earnings per share formula.
 First, we will find out the earnings per share.
 Basic Earnings per share = Net Income / Common Shares Outstanding = $450,000 / 50,000 = $9 per share.
Diluted Earnings per Share Formula = (Net Income – Preferred Stock Dividends) / (Common Shares Outstanding + Unexercised Employee Stock Options + Convertible Preferred Stocks + Convertible Debt + Warrants)
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 Or, Diluted EPS Formula = ($450,000 – $50,000) / (50,000 + 5000 + 23,000 + 10,000 + 2000)
 Or, DPS = $400,000 / 90,000 = $4.44 per share.
Explanation of Diluted Earnings per Share Formula
There is a difference between basic and diluted earnings per share. In basic earnings per share (EPS), the idea is to find out the net income per share of the firm. For example, if a firm has a net income of $100,000 and the firm has 10,000 outstanding shares; then the earnings per share (EPS) would be = ($100,000 / 10,000) = $10 per share.
However, in this case, the idea is about realization. In diluted earnings per share (DPS), along with the common outstanding shares, we will also consider convertible shares – the shares which have the possibility of turning into the company’s shares.
That’s why, in almost all situations, DPS would always be lower than the earnings per share (this is basic math – in the case of DPS, the denominator is much bigger).
Use of Diluted EPS Formula
If you look at the financial statements, you may not get the information related to the diluted earnings per share. You need to look at notes along with the financial statements to have a sense of diluted earnings per share.
Using diluted EPS formula helps investors know what would be the earnings per share if all or few convertible securities convert into the company’s shares.
As an investor, you need to look at both – earnings per share and diluted earnings per share to have a holistic view of earnings per share.
Diluted EPS Calculator
You can use the following Diluted EPS Calculator
Net Income  
Preferred Stock Dividends  
Common Shares Outstanding  
Unexercised Employee Stock options  
Convertible Preferred Stocks  
Convertible Debt  
Warrants  
Diluted Earnings per Share Formula =  
Diluted Earnings per Share Formula = 
 

Diluted Earnings per Share in Excel (with excel template)
Let us now do the same example above in Excel.
This is very simple. You need to provide the two inputs of Net income and Common Shares Outstanding.
You can easily do the Diluted EPS Calculation in the template provided.
First, we will find out the earnings per share.
Here is the formula for Diluted EPS Calculation
Diluted EPS Formula = (Net Income – Preferred Stock Dividends) / (Common Shares Outstanding + Unexercised Employee Stock Options + Convertible Preferred Stocks + Convertible Debt + Warrants)
Diluted EPS Formula Video
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This has been a guide to Diluted EPS Formula, practical examples and Diluted EPS calculator along with excel templates. You may also have a look at these articles below to learn more about Financial Analysis –
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