Financial Statement Analysis
- Profitability Ratios
- Profitability Ratios Formula
- Common Size Income Statement
- Vertical Analysis of Income Statement
- Profit Margin
- Profit Margin Formula
- Profit Percentage Formula
- Profit Formula
- Gross Profit Margin Formula
- Gross Profit Percentage
- Operating Profit Margin Formula
- EBIT Margin Formula
- Operating Income Formula
- Net Profit Margin Formula
- EBITDA Margin
- Degree of Operating Leverage Formula (DOL)
- NOPAT Formula
- OIBDA
- Earnings Per Share
- Basic EPS
- Diluted EPS
- Basic EPS vs Diluted EPS
- Return on Equity (ROE)
- Return on Equity Ratio
- Return on Capital Employed (ROCE)
- ROCE Formula (Return on Capital Employed)
- Return on Invested Capital (ROIC)
- Return On Investment (ROI)
- Rate of Return on Investment
- Return on Sales
- ROIC Formula (Return on Invested Capital)
- Return on Investment Formula (ROI)
- ROIC vs ROCE
- ROE vs ROA
- CFROI
- Cash on Cash Return
- Return on Total Assets (ROA)
- Return on Total Assets Formula
- Return on Average Capital Employed
- Capital employed Employed
- Return on Average Assets (ROAA)
- Return on Average Equity (ROAE)
- 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
- Operating Leverage
- EBIT vs EBITDA
- EBITDAR
- Capital Gains Yield
- Tax Equivalent Yield
- LTM Revenue
- Operating Expense Ratio Formula
- Overhead Ratio Formula
- Variable Costing Formula
- Capitalization Rate
- Cap Rate Formula
- Comparative Income Statement
- Capacity Utilization Rate Formula
- Total Expense Ratio Formula
- Markup
- Markup Percentage Formula
- Ratio Analysis (17+)
- Liquidity Ratios (29+)
- Turnover Ratios (17+)
- Efficiency Ratios (7+)
- Dividend Ratios (9+)
- Debt Ratios (26+)
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Diluted EPS Formula (Table of Contents)
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 above-diluted 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.
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- 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)
- 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 = |
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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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