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.
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.
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.