The formulas
Basic EPS = (net income − preferred dividends) ÷ weighted-average shares. Diluted EPS = (basic numerator + after-tax interest and preferred dividends added back) ÷ (weighted shares + treasury stock method shares + if-converted shares). The treasury stock and if-converted methods come from ASC 260-10, Earnings Per Share.
When to use it
Use it to recompute a client's reported basic and diluted EPS during an audit or review of a public company, to check a convertible or option disclosure, or to see which instruments are dilutive.
Limits
You supply weighted-average share counts and the average price, so the tool does not weight share issuances through the period. It handles one option block, one convertible debt instrument and one convertible preferred. It does not cover contingently issuable shares, written put options, two-class computations or share-based payment awards with unrecognized compensation as assumed proceeds.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What is the basic EPS formula?
Basic EPS = (net income available to common shareholders) ÷ weighted-average common shares outstanding. Income available to common is net income less preferred dividends declared and cumulative dividends for the period.
How does the treasury stock method work?
It assumes options or warrants are exercised and the proceeds buy back shares at the average market price for the period. Incremental shares = options − (options × exercise price ÷ average market price). Options with an exercise price at or above the average price are antidilutive and add nothing.
How does the if-converted method work?
It assumes conversion at the start of the period, or at issuance if later. For convertible debt the numerator adds back after-tax interest, interest × (1 − tax rate). For convertible preferred it adds back the preferred dividends, with no tax effect. The denominator adds the shares issued on conversion.
Why is a security excluded as antidilutive?
A potential share is included only if it lowers EPS. The tool ranks the securities by the numerator effect per added share, lowest first, and adds each only if running EPS falls. Diluted EPS therefore never exceeds basic EPS for income, and a net loss makes potential shares antidilutive.
What if the entity has discontinued operations?
ASC 260 uses income from continuing operations as the control number for deciding whether a potential share is dilutive, and applies that result to every other line. This tool tests against total income, so run it with continuing operations income when the two differ.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.