Fully Diluted EPS is the net income available to common shareholders as calculated by the weighted average number of common shares outstanding, plus all dilutive securities, whether or not they are considered common stock equivalents. Fully diluted EPS is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding plus all dilutive securities, whether or not they are considered common stock equivalents. The purpose of presenting fully diluted EPS is to show the worst possible case, which assumes that all the dilutive securities were converted. Thus, present and potential investors can see what their earnings per share would be, assuming maximum dilution. The formula to calculate fully diluted EPS is: Although the numerator in both cases represents net income available to common shareholders, the actual amounts are likely to be different.Fully Diluted EPS Definition
How to Calculate Fully Diluted EPS
Formula
Fully Diluted EPS FAQs
Fully Diluted Earnings Per Share (EPS) is a measure of the company’s financial performance for a given period, calculated by dividing its total earnings by the number of common and dilutive shares outstanding during that period.
Fully Diluted EPS is calculated by dividing the company’s total earnings for a given period, including any nonrecurring items and stock-based compensation, by the number of weighted average common shares outstanding during that period plus all dilutive securities.
The components of Fully Diluted EPS include the net income, or profit, from a reporting period divided by the number of shares outstanding plus any dilutive securities.
Basic Earnings Per Share (EPS) measures a company's earnings per share only for common stockholders and does not account for potential dilution from other securities, such as options and warrants. Fully Diluted EPS considers all dilutive securities in the calculation of earnings per share.
Fully Diluted EPS can be used to compare a company's financial performance across different periods, between companies in the same industry, or when considering potential mergers or acquisitions. Additionally, it may be used to evaluate the current level of a company’s stock price relative to its fully diluted earnings per share.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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