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Earnings Per Share

A measure of company performance defined as total corporate earnings divided by total shares outstanding. For diluted EPS, in the denominator the calculation includes stock options, along with other equity awards (and any arrangements that obligate the company to issue stock, such as convertible preferred stock and warrants). For stock options and stock appreciation rights, the grants are assumed to be vested and exercised. For restricted stock/RSUs, the unvested grants are assumed to have vested (the already-vested grants have been in the denominator of the basic EPS calculation since vesting). Performance awards are part of the denominator for diluted EPS purposes only if they would be earned by the end of the period for that EPS calculation. This can cause these grants to come in and out of diluted EPS, depending on the reporting period. In the denominator calculation of total outstanding shares, basic EPS does not include shares until they are issued.

When companies realize any proceeds with the issue of shares, as with a stock option exercise, the EPS denominator increases by the net number of shares (actual number of shares issued minus shares that could be purchased back with assumed proceeds). For more on dilution and the EPS calculation, see the related FAQ.

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