Answer for P/E Ratio

Diluted EPS is preferred since diluted EPS include all the dilution effect caused by all outstanding convertible preferred shares, convertible debt, equity options (mainly employee-based options) and warrants.

Do note that when a company issue options or warrants, it’s a cost to the shareholders, whether its in the money (which you can see the effect in Diluted EPS), or out of money (which although you can’t see the effect in Diluted EPS, but its still a cost that is not yet reflected in the EPS).

About The Author

Peter Lim

Investor (Not Speculator).