What are the differences between basic and diluted earnings per share?
What are the differences between the numerator and the denominator in the basic and diluted earnings per share calculations? As an investor, do you evaluate a company as a potential investment using basic or diluted earnings per share? Why?
By definition, EPS is net income divided by the number of shares outstanding; however, both the numerator and denominator can change depending on how you define "earnings" and "shares outstanding".
Shares outstanding can be classified as either primary (basic EPS) or fully diluted (diluted EPS).
Basic EPS is calculated using the number of ...
The solution explains the differences between basic and diluted earnings per share.