Earnings per share, what is it? Well, it's how much profit a company makes for each share of its stock. Now, this is quite useful for shareholders. They can find their EPS and then multiply by the number of shares they have. Or look at how it's improved or deteriorated over time. But how do we calculate it? Well, there's two ways. The first is basic EPS, net income divided by the number of basic shares. What is the number of basic shares? What's the number of real shares that are owned outside of the company at the moment? An alternative to this is diluted EPS. It looks quite similar but this time it's diluted shares as the denominator. Your diluted share count is the basic number of shares, the real number of shares plus some maybe shares that might exist in the future. For instance, a great example of this is employees having share options. This gives the employees the option to buy shares in the future. So, your diluted shares includes those maybe shares in the future. Both of these calculations are important but the diluted EPS is probably used more often, as it's a worst case scenario. What is my net income divided by the largest number? Basic or diluted? Well, it's the diluted, so our diluted EPS used a bit more often.