Definition
Diluted shares add potential shares from stock options, warrants, convertible bonds, and convertible preferred stock to basic shares. Diluted EPS uses this higher share count, providing a more conservative earnings measure. High dilution indicates significant equity-based compensation.
Formula
Diluted Shares = Basic Shares + In-the-money Options + Convertible Securities
Example
A company has 100M basic shares plus 10M in-the-money options and 5M from convertible bonds. Diluted shares: 115M (15% higher than basic).
FAQ
What is Diluted Shares Outstanding?
Share count including all potential shares from options, warrants, and convertibles.
How do you calculate Diluted Shares Outstanding?
A common formula for Diluted Shares Outstanding is: Diluted Shares = Basic Shares + In-the-money Options + Convertible Securities
Why is Diluted Shares Outstanding important?
Diluted Shares Outstanding helps investors evaluate financial statements and make more informed decisions.