Diluted EPS is important for shareholders because it lays down the
earnings that a shareholder would get in the worst of the scenarios. If
a public company has different stock types in its capital framework, it
should provide information for both diluted EPS and Basic EPS. This
information should be for both net income and existing operations
and is provided on the income statement of the company. As long as
the company has no additional potential shares outstanding, the
diluted EPS will always be lower than the simple or basic EPS.
Antidilutive describes the effects of actions such as securities
retirement, securities conversion or corporate actions on the earnings
per share (EPS) or voting power of existing shareholders. If an activity
is antidilutive, it maintains or increases the the EPS by either
increasing earnings or reducing the a numbers of shares outstanding,
which will increase the company's earnings. Other use antidilutive
refers to ownership rights, whereby existing shareholders in a certain
class of shares have rights to purchase additional shares when there
is a new issuance of securities that would otherwise reduce the
ownership percentage of existing holders. This is called an anti-
dilution provision. This ability of existing shareholders to purchase
additional shares helps them maintain their proportion of outstanding
share ownership, therefore maintaining their share of the voting
power or receipt of the company's EPS.
