Diluted Earnings per Share

Diluted EPS answers what earnings would be per share if employee options, convertible bonds and warrants all became shares, which is the conservative and usually more honest figure. The gap between basic and diluted EPS measures how much of the company's future profit has already been promised to people other than current shareholders. A company with a large option pool can grow profits steadily while diluted EPS stagnates, and quoting only the basic figure hides this. Anti-dilutive instruments, which would raise EPS, are excluded from the calculation by the standard.