Diluted EPS vs. Options star content check off when done

\(Diluted\ EPS=\frac{NI\ -\ P_d}{WACSO\ +(S_{n}\ -S_{p}) \times \ t}\)

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\(Diluted\ EPS=\frac{NI\ -\ P_d}{WACSO\ +(S_{n}\ -S_{p}) \times \ t}\)

\(EPS\) - earnings per share
\(NI\) - net income
\(P_d\) - preferred dividends
\(WACSO\) - weighted average common shares outstanding
\(S_{n}\) - new shares that would have been issued at option exercise
\(S_{p}\) - shares that would have been purchased with cash received upon exercise
\(t\) - proportion of year during which the financial instruments were outstanding

Tips:

For options the treasury stock method (name under U.S. GAAP only) is used. The treasury stock method tells us what would happen to EPS if we had converted the stock options into common shares.