What is the difference between Basic EPS and Diluted EPS? Well, first of all, Basic EPS takes the company's earnings, or net income, and divides it by the basic number of shares. The basic number shares is the basic number of shares outstanding, i.e. owned by people outside of the company. Fully diluted EPS basically takes the same numerator, there may be some small differences, and divides it by the diluted number of shares. My diluted number uses the basic shares, plus it accounts for financial instruments that could be converted into shares. So let's say the company had some share options that it'd given to maybe its CEO, or to some of its employees. If those share options are exercised they may end up creating new shares. Thus, the basic number shares would go up. Other instruments that could lead to new shares include warrants, i.e. items that have new equity shares attached to them. Convertible bonds, where the debt itself turns into shares. Restriction stock units, which are free options. And convertible preference shares. Preference shares are not included in the basic number of shares. But if they were converted into ordinary shares then they would have to be included. Those potential shares, those maybe new shares, they are the difference between the basic number of shares and the diluted number of shares.