Diluted earnings per share and Earnings: Difference between pages

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''Financial ratio analysis - performance ratios.''
1. ''Shareholder profits.''


(Diluted EPS).  
In relation to a UK firm, its profits available for distribution to ordinary shareholders.


Diluted earnings per share are calculated as:
Also known as Net Profit.


Profit attributable to ordinary shareholders '''÷''' Diluted weighted average number of shares in issue during the period.


Profit after tax attributable to ordinary shareholders is often known as 'earnings' or 'net profit'.
2. ''Profits.''


In relation to firms more generally, their profits.


<span style="color:#4B0082">'''''Diluted EPS example'''''</span>


Earnings for the period are £40 million and the diluted number of shares is 52 million.
3. ''Income.''


EPS = £40m / 52m
Any stream of income or profits, for example interest earnings.


= £0.77 (= 77 pence)


4. ''Earned income.''


'Diluted' earnings per share are calculated by adjusting the earnings and number of shares for the effects of 'dilution' of the current ordinary shareholders' entitlements.
In relation to individuals, their earned income, for example salary.


Distinguished from their investment income and their capital gains. 


'Dilution' is defined in IAS 33 as:
This distinction is important in relation to individual taxation, and in relation to pensions.
 
The reduction in EPS assuming that the number of shares increases because:
#Convertible instruments are converted,
#Options or warrants are exercised, or
#Ordinary shares are issued on the satisfaction of specified conditions.
 
 
Relevant accounting standards include IAS 33 and Section 1 of FRS 102.




== See also ==
== See also ==
* [[Convertible debt]]
* [[Adjusted earnings]]
* [[Dilution]]
* [[Diluted earnings per share]]
* [[Earnings]]
* [[Distribution]]
* [[Earnings per share]]
* [[Dividend payout ratio]]
* [[IAS 33]]
* [[Earnings at risk]]
* [[FRS 102]]
* [[Earnings cap]]
* [[Option]]
* [[Earnings credit allowance]]
* [[Pence]]
* [[Earnings multiples]]
* [[Profit attributable to ordinary shareholders]]
* [[Earnings per share]]  (EPS)
* [[Warrant]]
* [[Earnings yield]]
* [[Earn-out]]
* [[EBIT]]
* [[EBITDA]]
* [[Interest]]
* [[Invisible earnings]]
* [[Lower earnings limit]]
* [[Multiples valuation]]
* [[Net profit]]
* [[Non-GAAP earnings]]
* [[Owner earnings]]
* [[Pension]]
* [[Profit after tax]]  (PAT)
* [[Projected earnings]]
* [[Price to earnings ratio]]  (PER)
* [[Retained earnings]]
* [[Shareholders cash flow]]
* [[Upper earnings limit]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:Corporate_finance]]
[[Category:The_business_context]]

Latest revision as of 08:47, 30 October 2022

1. Shareholder profits.

In relation to a UK firm, its profits available for distribution to ordinary shareholders.

Also known as Net Profit.


2. Profits.

In relation to firms more generally, their profits.


3. Income.

Any stream of income or profits, for example interest earnings.


4. Earned income.

In relation to individuals, their earned income, for example salary.

Distinguished from their investment income and their capital gains.

This distinction is important in relation to individual taxation, and in relation to pensions.


See also

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