Question

What is the purpose/importance of Earnings Per Share (EPS) reporting on the Income Statement? What is diluted EPS and why must it be computed and reported?

Answer 1

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EPS (Earnings Per Share) is considered important because it gives a clear picture to the investors about the amount/net income generated in the business and how much the investors earned per share they own. EPS must be recorded by all public companies as per the guidelines given by GAAP ( Generally Accepted Accounting Principles).

Diluted EPS (Diluted Earnings Per Share) considers all the shares like preferred also as the common stock and diluted EPS is calculated.