What is the difference between Basic Earnings Per Share and Diluted Earnings Per Share?

When EPS is required in the Return on Investment Ratios what should i take, The Basic EPS or the Diluted EPS?

i know the formula EPS= (Net Income-Preferred Dividends)/ Outsatnding Shares.

Again the question is which EPS: The Basic EPS or the Diluted EPS?

You would use the figure that is most relevant to you. There is no right or wrong figure. It is the interpretation of the result that is important.

Diluted earnings per share is calculated on the assumption that all convertible securities issued by the company have been converted into common stock, therefore the total earnings have to be divided among more shares of stock. Basic earnings per share is based on the assumption that convertible securities are not converted. The calculation of EPS is actually much more complicated, but the above gives you a good idea of what is involved.

I use a simple 12 month basic EPS in my calculations.

PE x EPS = Intrinsic value

(PEG)(EPS)(EPS growth rate) = intrinsic value

Those are my two EPS formulas... :) Time periods have to be the same for each metric..

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