Diluted EPS Formula Template
Diluted EPS Formula Template
This Diluted EPS Formula template shows you how to compute the diluted earnings per share using information from the income statement and an employee option schedule.
This is what the diluted EPS formula template looks like:
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The Diluted EPS formula is equal to Net Income less preferred dividends, divided by the total number of diluted shares outstanding (basic shares outstanding plus the exercise of in-the-money options, warrants, and other dilutive securities).
Diluted EPS Formula:
Diluted EPS = (net income – preferred dividends) / (weighted average number of shares outstanding + the conversion of any in-the-money options, warrants, and other dilutive securities)
Why do Investors and Analysts Calculate Diluted EPS?
The reason that analysts and investors calculate diluted EPS is that basic EPS may overstate the actual amount of earnings per share that a common shareholder is entitled to.
Companies frequently have dilutive securities outstanding – like options and warrants – that will increase the total number of shares outstanding when converted.
Since the conversion of options into shares won’t add any additional net income to the business, the increased share count makes the conversion dilutive.
Options may have been granted to employees, for example, that are in-the-money (strike price is below the current market price) but have not been converted yet. If options are in-the-money, they should be accounted for in a diluted EPS calculation.
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Additional Resources
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
The Financial Modeling Certification
Analyst Certification FMVA® Program
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
The Financial Modeling Certification
Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.
A well rounded financial analyst possesses all of the above skills!
Additional Questions & Answers
CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.
In order to become a great financial analyst, here are some more questions and answers for you to discover:
- What is Financial Modeling?
- How Do You Build a DCF Model?
- What is Sensitivity Analysis?
- How Do You Value a Business?
Excel Tutorial
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
The Financial Modeling Certification
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