When are basic and diluted earnings per share used?

Diluted earnings per share shall be calculated if there are potentially dilutive common shares. Potential common shares mainly include: convertible corporate bonds, warrants and share optionsIf there are no potential common shares, diluted earnings per share = basic earnings per share with dilutive potential common shares, diluted earnings per share shall be calculated.

Potential common shares mainly include: convertible corporate bonds, warrants and share options.

1) Convertible corporate bonds. For convertible corporate bonds, when calculating diluted earnings per share, the adjustment item of the numerator is the after-tax impact of interest and other expenses recognized as expenses in the current period of the convertible corporate bonds; The adjustment item for the denominator is the weighted average number of shares that are converted into common shares at the beginning of the current period or on the issue date of the convertible corporate bonds.

b) Warrants and share options. According to Article 10 of the Code, the dilution of warrants, share options, etc., shall be considered when the exercise ** is lower than the average market of ordinary shares for the current period**.

When calculating diluted earnings per share, the amount of net profit as a numerator is generally unchanged; The adjustment of the denominator shall be the number of additional shares of common stock calculated in accordance with the formula set forth in Article 10 of these Standards, taking into account the time weight.

The exercise** in the formula and the number of shares of common stock to be converted at the time of exercise shall be determined in accordance with the relevant warrant contract and share option contract. The current average market of common stock in the formula, usually calculated as a simple arithmetic average of representative transactions on a weekly or monthly basis. In the case of relatively stable **, the **price of weekly or monthly ** can be used as a representative**; In the case of large fluctuations, the average of the highest and lowest prices of the week or month can be used as representative.

Regardless of the method used to calculate the average market**, once determined, it may not be changed at will unless there is conclusive evidence that the original calculation method no longer applies. In the case of the current issuance of warrants or stock options, the average market for common stocks** shall be calculated from the date of issuance of the warrants or stock options.

3) a number of potential common stocks.

Pursuant to Article 12 of the Code, dilutive potential common shares shall be included in diluted earnings per share in descending order of dilution until the diluted earnings per share are minimized. The degree of dilution is measured by the size of earnings per share of the incremental shares converted by different potential common shares, i.e., the amount determined by dividing the increased net profit for the period attributable to common shareholders by the weighted average number of additional common shares, assuming that the dilutive potential common shares are converted into common shares.

When determining the order in which diluted earnings per share should be included, the impact of share options and warrants should generally be considered first.

Each issue of potential common shares should be treated as different potential common shares and their dilution should be judged separately and not as a whole.

Earnings per share (earning

Pershare, abbreviated as EPS).

Also known as after-tax profit per share and earnings per share, it refers to the ratio of after-tax profit to total share capital. It is one of the important indicators to determine the value of investment, a basic indicator for analyzing the value of each share, an important indicator for comprehensively reflecting the company's profitability, and it is the ratio of the company's net income to the number of shares in a certain period.

Diluted earnings per share are calculated on the basis of basic earnings per share, assuming that all of the company's outstanding dilutive potential common shares have been converted into common shares, thereby adjusting for the net profit attributable to common shareholders for the period and the weighted average number of common shares outstanding, respectively. Diluted earnings per share is a new term for the average investor. If a listed company has dilutive potential ordinary shares, it shall adjust the net profit attributable to ordinary shareholders in the reporting period and the weighted average number of ordinary shares outstanding, respectively, and calculate diluted earnings per share accordingly.

A new term emerges here, "dilutive potential common stock," which refers to potential common stock that is assumed to reduce earnings per share if converted to common stock in the current period.

Basic earnings per share is relative to diluted earnings per share, i.e., earnings per share without deductions and dilution.

Diluted earnings per share are calculated on the basis of basic earnings per share, assuming that all of the company's outstanding dilutive potential common shares have been converted into common shares, thereby adjusting for the net profit attributable to common shareholders for the period and the weighted average number of common shares outstanding, respectively.

You can weigh up for yourself when to use them.

Basic earnings per share is calculated based on the current total shares.

Dilution of earnings per share, taking into account the possibility of increasing shares, such as convertible bonds, then the conversion of shares should be considered.

Enterprises shall be classified as ordinary.

The net profit of shareholders for the period is calculated based on the weighted average number of ordinary shares outstanding.

If there are dilutive potential ordinary shares of an enterprise, the net profit for the current period attributable to shareholders of ordinary shares and the weighted average number of ordinary shares outstanding shall be adjusted separately and diluted accordingly.

The difference between the two is that basic earnings per share do not need to take into account dilutive potential common shares (such as convertible corporate bonds, warrants, ** options, etc.), but diluted earnings per share need to consider the impact of dilutive potential common shares on the numerator and denominator.

The main differences between basic EPS and diluted EPS are as follows:

First, the nature of the income is different.

Basic earnings per share refers to the earnings per share calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of outstanding ordinary shares. If the enterprise has consolidated financial statements, the enterprise should calculate and present earnings per share on the basis of the consolidated financial statements.

Diluted earnings per share are calculated on the basis of basic earnings per share, assuming that all of the company's outstanding dilutive potential common shares have been converted into common shares, thereby adjusting for the net profit attributable to common shareholders for the period and the weighted average number of common shares outstanding, respectively.

2. Convertible corporate bonds are different.

For convertible corporate bonds, when calculating basic earnings per share, the numerator is adjusted to the after-tax effect of interest and other expenses recognized as expenses in the current period of the convertible corporate bonds.

The adjustment for the denominator of diluted earnings per share is the weighted average of the number of shares that are converted into common shares assuming that the convertible corporate bonds are at the beginning of the current period or on the issue date.

3. The calculation method is different.

The formula for calculating basic earnings per share is: net operating income = operating income - operating expenses - depreciation of productive fixed assets - production Xiangyou digging tax + net income from rental housing, net income from leasing other assets and converted net rent of self-owned housing, etc. Net property income does not include premium income from the transfer of ownership of assets.

The formula for calculating diluted earnings per share is expressed as: real growth rate of per capita disposable income = (per capita disposable income in the reporting period per capita disposable income in the base period) Household consumption** index -100%.

Earnings per share: It is determined by dividing the net profit for the current period by the weighted average of the common shares issued in the current period, which can reflect the profitability under the current share capital structure.

Diluted earnings per share: The weighted average number of shares that have the potential to be converted into equity in the listed company are taken into account, such as convertible bonds, warrants, etc. Because they may change to ** in the future, thereby diluting the earnings per share of the listed company.