THE PLAYGROUND
Slice the earnings
A share count is a denominator with consequences.
LIVE EXPERIMENT
Slice the earnings
Basic / diluted EPS2 / 1.5
Before you move a sliderCan EPS rise even when total earnings do not?
Basic EPS = (120 − 0) / 60 = 2
READ THE MECHANISM
EPS uses earnings available to common shareholders, not revenue. A smaller weighted-average share count increases EPS without necessarily increasing total profit. Dilution makes the earnings slice smaller.
Model assumptions & units
Income and dividends are $m. Potential shares are assumed to be dilutive incremental shares with no numerator adjustment. When common earnings are negative, they are excluded as anti-dilutive. Actual options and convertible securities require additional tests.