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Labs
Slice the earnings
A share count is a denominator with consequences.
Live experiment
Slice the earnings
Basic vs diluted EPS2 vs 1.5
Before you move a sliderCan EPS rise while total earnings stand still?
Basic EPS = (120 − 0) ÷ 60 = 2
Read the mechanism
EPS divides the earnings that belong to common shareholders, not revenue. Fewer shares means a bigger slice each, even if total profit did not move. Dilution makes every slice thinner.
Model assumptions and units
Income and dividends are $m. Potential shares are assumed dilutive with no change to the numerator. With a loss to common shareholders they are excluded as anti-dilutive. Real options and convertibles need their own tests.