When are diluted earnings per share (EPS) calculated? From the following information, calculate diluted earnings per share (EPS) of the company: Net profit for the current year (after tax): ₹83,00,000 Number of equity sh

Diluted earnings per share is calculated when there are potential equity shares in the capital structure of the enterprise. Potential equity share are those financial instruments which entitle the holder to the right of equity shares like convertible debentures, convertible preference shares, options warrants etc. Calculation of Diluted earnings per share: Particulars ₹ Net profit for the current year 83,00,000 Add: Interest expense for the current year 10,00,000 Less: tax relating to Interest expense (30% of ₹10,00,000) (3,00,000) Adjusted net profit for the current year 90,00,000 Number of equity shares resulting from conversion of debentures = 1,00,000 × 10 = 10,00,000 equity shares. Diluted earnings per share = 90,00,000 / (20,00,000 + 10,00,000) shares = 90,00,000 / 30,00,000 shares = ₹3 per Share