Diluted Earnings Per Share

diluted earnings per share are earnings on a per share basis if all available stock options, convertibles, warrants and preferred shares were to be exercised. Earnings per share or basics earnings per share only takes into account the amount of shares outstanding on the market when doing the earnings calculation. Diluted earnings per share, however give an investor a clearer picture of how much they are paying for a stock since if more options are exercised then there would be more shares and thus less earnings per share; making the stock more expensive.