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in this video weamp;#39;re gonna talk about how to calculate diluted earnings per share by using the Treasury stock method so when investors hold stock warrants or stock options in our firm they can potentially convert those options or warrants into stock into common shares of our firm and that could in turn dilute or reduce our earnings per share so we think about is go back to our basic earnings per share calculation and so we remember that we have net income and then we subtract out preferred dividends because we want to know the amount of net income available to common shareholders and then in the denominator we have the weighted average in the number of common shares outstanding during the period and this number is going to change the denominator is going to change if thereamp;#39;s a conversion if the people who have options decide to convert those options decide to exercise those options and actually purchase our stock thatamp;#39;s gonna change the number of shares we have o