Why are preferred dividends deducted from net income when calculating EPS? Are there circumstances when this deduction is not made? 

Let’s start by defining the following terms.

a.  Basic earnings per share.

b.  Potentially dilutive security.

c. Diluted earnings per share.

d. Complex capital structure.

e. Potential common stock.

2)  Why are preferred dividends deducted from net income when calculating EPS? Are there circumstances when this deduction is not made?