As a shareholder knowing the earnings per share (EPS) is something I
would consider very important. EPS is a ratio that is calculated by
dividing the net income of a company (after deducting any preferred
dividends) by the weighted average of the number of shares of
common stock that are currently outstanding. A greater EPS suggests
that an investor has more equity per share.
Securities that can affect EPS are known as dilutive securities. These
are never issued as common stock, but they can ultimately increase
the number of shares outstanding. Stock options, convertible
preferred stock, and warrants are examples of dilutive securities. Any
of these actions will result in the issuing of additional common stock
shares. Anti-dilutive instruments, on the other hand, allow a
shareholder to purchase additional shares of common stock without
reducing their equity stake in the company. Some activities, such as
share retirement, are considered anti-dilutive since they enhance a
company's EPS by reducing the number of outstanding common
stock shares.
Anti-dilutive shares would be more appealing to me as a possible
shareholder since they would allow me to prevent losing stock in the
company. If I were to become a shareholder, I'd like to see as high an
EPS as possible.
References
Whalen, J. M., Jones, J. P., & Pagach, D. P. (2017).
Intermediate
Accounting: Reporting and analysis
. Boston, MA: Cengage Learning.
Team, T. I. (2021, September 13).
The differences between Dilutive
Securities and anti-dilutive securities
. Investopedia. Retrieved May
12, 2022, from
https://www.investopedia.com/ask/answers/102714/what-are-
differences-between-dilutive-securities-and-antidilutive-
securities.asp
