Fully Diluted Earnings per Share (EPS) Definition

Fully Diluted EPS Definition

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.

How to Calculate Fully Diluted EPS

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.

Formula

The formula to calculate fully diluted EPS is:

Fully-diluted-EPS-Formula

Although the numerator in both cases represents net income available to common shareholders, the actual amounts are likely to be different.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

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.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.