What Is The Difference Between Basic And Diluted Earnings Per Share?

Photo by Olya Kobruseva on Pexels.com An increase in the number of common shares outstanding dilutes (reduces) earnings per share. For instance, if company ABC has an outstanding issue of preferred stock that is convertible into shares of common stock at a rate of three shares of common stock for two shares of preferred stock. The conversion would increase the number of common shares…