What is Meaning of Basic & Dilluted EPS, any difference between both...can Basic and Dilluted EPS are same on all time.?
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Eps
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Basic earnings per share should be calculated by dividing the net
profit or loss for the period attributable to equity shareholders by the
weighted average number of equity shares outstanding during the period.
For the purpose of calculating basic earnings per share, the net
profit or loss for the period attributable to equity shareholders should be
the net profit or loss for the period after deducting preference dividends
and any attributable tax thereto for the period.
Diluted Earnings Per Share
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period
should be adjusted for the effects of all dilutive potential equity
shares.
Example:-
| Example - Convertible Debentures | |
| Net profit for the current year | Rs. 1,00,00,000 |
| No. of equity shares outstanding | 50,00,000 |
| Basic earnings per share | Rs. 2.00 |
| No. of 12% convertible debentures of | 1,00,000 |
| Rs. 100 each | |
| Each debenture is convertible into | |
| 10 equity shares | |
| Interest expense for the current year | Rs. 12,00,000 |
| Tax relating to interest expense (30%) | Rs. 3,60,000 |
| Adjusted net profit for the current year | Rs. (1,00,00,000 + 12,00,000 - |
| 3,60,000) = Rs. 1,08,40,000 | |
| No. of equity shares resulting from | 10,00,000 |
| conversion of debentures | |
| No. of equity shares used to compute | 50,00,000 + 10,00,000 = |
| diluted earnings per share | 60,00,000 |
| Diluted earnings per share | 1,08,40,000/60,00,000 = |
| Re. 1.81 |
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