What are Diluted Earnings Per Share?
Diluted earnings per share is a measure of earnings based on the, usually hypothetical, situation of every possible share being taken up. This takes account of situations such as stock options and convertible bonds that could mean the total number of shares increases. While diluted earnings per share is something of a worst case scenario and not very relevant to the real world, it can be used to compare different companies on an equal basis. Earnings per share is designed as a measure of how well a company is using the money invested into it when it went public. The precise method of calculating the figure varies, depending on accounting practices, but the general principle is that it is the total profits divided by the number of shares in the company. This makes it easier to assess a company’s performance in situations such as when one company has a higher profit than a rival, but also has many more shares, meaning that profit is less valuable in terms of individual shares. In princip
