What is Basic and Diluted EPS ?

Earnings per equity share:

It means profit divided by number of equity shares.

Question 1

Profit Earned                  4000000
Share capital                    100000
(10000 shares @10 each)

Calculate EPS

Earning per Equity Share              400   (4000000/10000)

Note:-   We divide profit by number of shares and not share capital

Question 2

Profit Earned             4000000
Share capital               140000
Co had 10000 share of beginning of the year it issued 4000 share on 1 july

Calculate EPS

WEIGHTED AVG NO OF SHARES = 10000*3/12+14000*9/12 13000

OR

WEIGHTED AVG NO OF SHARES = 10000*12/12+4000*9/12 13000

EPS = 4000000/13000 = 307.6923077

Question 3

Profit Earned                         4000000
Share capital                           100000
Co had 10000 shares during the year. it had received 20000 share application money.Next year 2000 shares will be issued @10 each

Calculate EPS

1. Basic 400 (400000/10000)
2. Diluted 333.3333333 (400000/12000)

Note:-

Normally Basic and Diluted EPS are same,

However in Certain Cases,Diluted EPS can be different also like

1. Share Application Money received but share not yet issued
2. Convertible Bonds/Debentures/Preference Shares (which will be converted into shares)
3. ESOP (Employee Stock Option Plan(Shares issued to Employees)

Difference between