Diluted earnings per share reflects the EPS that would result if all potentially dilutive securities were converted into shares of common stock.

Question

Quizplus · Accepted Answer

Diluted earnings per share takes into account the potential impact of all potentially dilutive securities, such as stock options, convertible bonds or preferred shares, on the outstanding shares of common stock. This calculation assumes that all such potential shares have been converted into common shares, thus providing a more conservative measure of the company's earnings per share.

Diluted Earnings Per Share Reflects the EPS That Would Result