Chapter 14 · Profit and Loss
EPS, diluted EPS and the traps
Profit per share sounds simple and is the number most often misread in Nepali quarterlies.
25 of 66 · 9 min
| Measure | Formula |
|---|---|
| Basic EPS | Net profit ÷ Weighted average shares outstanding |
| Diluted EPS | Net profit ÷ (Shares + all shares that could be created) |
Diluted EPS assumes everything convertible into shares — convertible debentures, warrants, employee options — has converted. It is the more conservative number, and the one to use when both are given.
Worked example
Net profit Rs 56,25,000; 2,00,000 shares outstanding; convertible debentures that would create another 25,000 shares.
- Basic EPS = 56,25,000 ÷ 2,00,000 = Rs 28.13
- Diluted EPS = 56,25,000 ÷ 2,25,000 = Rs 25.00
- The dilution is about 11% — material, and invisible if you only read the headline.
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