-
What is diluted earnings per share?
Posted 12 February, 2010 by Marley Corinne Benjamin from Malaysiathanks, Skipper for a best site. I have a question for you on something i can't conceive: what is diluted earnings per share?High roller Skipper Answers:Thank you for your vote of confidence, Marley. Diluted earnings per share is A performance metric used to gauge the quality of a company's earnings per share (EPS) if all convertible securities were exercised. Convertible securities refers to all outstanding convertible preferred shares, convertible debentures, stock options (primarily employee based) and warrants. Unless the company has no additional potential shares outstanding (a relatively rare circumstance) the diluted EPS will always be lower than the simple EPS. Remember that earnings per share is calculated by dividing the company's profit by the number of shares outstanding. Warrants, stock options, convertible preferred shares, etc. all serve to increasing the number of shares outstanding. As a shareholder, this is a bad thing. If the denominator in the equation (shares outstanding) is larger, the earnings per share is reduced (the same profit figure is used in the numerator). This is a conservative metric because it indicates somewhat of a worst-case scenario. On one hand, everyone holding options, warrants, convertible preferred shares, etc. is unlikely convert their shares all at once. At the same time, if things go well, there is a good chance that all options and convertibles will be converted into common stock. A big difference in a company's EPS and diluted EPS can indicate high potential dilution for the company's shares, an attribute almost unanimously ostracized by analysts and investors alike.Go to
Related Questions
-
dear Sorcerer
Posted 18 May, 2009 by Kinley Andy Bridges from Jingdezhen in Chinai'm unmistakably an inexperienced user, and there was something that i can't fathom: what does deficiency agreement mean?
Read the answer Answered by FX Sorcerer -
A simple inquiry on banker reference
Posted 21 February, 2010 by Leon Tyra Mccormick from PanjinDear Capital Authority, i have a question about something that i didn't understand: what does banker reference mean?
Read the answer Answered by Capital Authority -
please define henry hub
Posted 09 May, 2009 by Tucker D. Howe from Mexicomy name is Tucker from Mexico. I ain't indubitably an inexperienced user, yet there is a term i can't catch on to: what does henry hub mean?
Read the answer Answered by Capital Authority
Want to find out more about forex killer tutorial? Check out fx sites; each broker having an educational tutorials, fast downloads, a customer support service and Beginner friendly service; in the following languages: chinese, russian, arabic and english, regulated by BAFIN(DE), FSA(GB), FSA(JP) or NFA(US).
