Hello Sirs,
Would anyone please tell me the meaning of ''Diluted EPS''
Thanking You
Sakyasingh Rath (student) (56 Points)
03 October 2008Hello Sirs,
Would anyone please tell me the meaning of ''Diluted EPS''
Thanking You
CA.Sanjay Chopra
(Job)
(42 Points)
Replied 03 October 2008
There are 2 sorts of Earning Per Share as per AS 20 issued by ICAI:-
Basic EPS= Profit Available for Equity -Shareholders
No. of equity shares
Diluted EPS = Profit availble for Equity Shareholders
No.of Diluted shares
Now diluted no. of shares are Basic no. of equity shares + diluted securities which are converted into equity shares like convertible debentures, bonus shares etc.
salman
(ca)
(42 Points)
Replied 03 October 2008
friends allow me explain diluted EPS in greater detail.
Diluted EPS:
When profit available for equity sh holders and Weighted avg no of eq sh are adjusted for the effects of all diluted potental equity shares ... the resultant EPS is called diluted EPS.
Potential Equity shares:
it is that financial instrument that can be converted into equity shares in future.
example: convertible debentures, convertable pref sh, ESOP, share warrants.
Test of dilution:
A potential eq sh is considered diluted "if and only if " its conversion into eq sh reduces the EPS from Continuing Ordinary Operations (COO).
Hence,
Diluted EPS = Profit available for eq sh ( after adjusting dilution)
Weighted avg no of sh ( including diluted potential eq sh)
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