Because diluted EPS include dilutive securities such as convertible securities and employee stock options, it must always be less than or equal to basic EPS.

Question

Quizplus · Accepted Answer

Diluted EPS accounts for the potential dilution that could occur if convertible securities and options were exercised, which increases the number of shares outstanding, typically leading to a lower EPS than the basic EPS, which does not consider such potential dilution.

Because Diluted EPS Include Dilutive Securities Such as Convertible Securities