When is Diluted EPS calculated?

Diluted Earnings Per Share (EPS) is specifically calculated to account for the potential impact of convertible securities, options, and other financial instruments that could dilute the existing shares of a company. This means that whenever there are potentially dilutive securities, a company must assess how these might affect the earnings available to shareholders. Diluted EPS provides a more conservative measure of earnings per share, reflecting the worst-case scenario if all dilutive instruments were to be converted to common stock.

Calculation of diluted EPS is essential for investors as it gives a clearer picture of the actual earnings per share, considering the possibility that future issuances of stock could affect their ownership stake. This assessment ensures that investors have a complete understanding of the company's financial health and performance, rather than just what is presented through basic EPS calculations.

In contrast, the other options focus on the timing of calculations or situations that do not directly relate to the reason for diluted EPS. For instance, going public does not inherently necessitate the calculation of diluted EPS, nor does the point at which all common shares are issued or the timing being limited to just the end of the fiscal year. The focus remains solely on when potentially dilutive securities exist, which necessitates the calculation of diluted EPS.