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Dear Mike,
Could you please explain diluted eps . Why do we use it and for what purpose. I have read notes but as there is no lecture on it so I am not much clear about the concept .Kind regards.
The idea is to tell existing and prospective investors what the eps would have been if convertible financial instruments had been able to convert into equity shares and had so converted
We know that they didn’t, and we know that, according to the terms of issue, they typically couldn’t convert yet, but that’s not what our investors want to know. They want to know “if they had been able to convert and if they had in fact converted, what would the eps have been”
Is that enough?
Thank you so much Mike. I understood it .
Could you please explain diluted EPS OPTION with a little example. It would be an advantage for me.Kind regards .
Where there are options outstanding, we need a little working
Image 2 million options outstanding, exercise price $3
Average mid market price during the year was $4
2 million @ $3 raises $6 million
To have raised $6 million during the year would have meant issuing 1.5 million shares @ $4
So 1,500,000 @ $4 is the equivalent of 2,000,000 @ $3 + 500,000 free shares (no $value)
And it’s those 500,000 that are the diluting shares
Is that ok?
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