Diluted Earnings per Share
Diluted Earnings per Share (EPS) is a financial metric that calculates the earnings per share of a company after adjusting for the impact of potential dilution from convertible securities, such as stock options, warrants, and convertible preferred stocks.
Dilution occurs when a company issues more shares, which reduces the overall earnings per share. Diluted Earnings per Share is a critical metric because it reflects the true earnings potential of the company and its ability to generate profits.
In the financial statements, Diluted EPS is calculated by taking the net income available to common shareholders and dividing it by the total number of shares outstanding, including any dilutive securities that may potentially convert to common shares.
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