Diluted Earnings Per Share

A way of measuring the quality of a company's earnings if all of its convertible securities were exercised. The calculation assumes that all warrants and convertible shares, bonds, preference shares and stock options have been converted into ordinary shares or common stock. The figure is then divided into profit. Earnings on a diluted basis involve more shares than on a non-diluted basis so the figure is lower than for basic earnings per share. Company results often include both diluted and non-diluted earnings figures. The expression 'fully diluted earnings per share' means that all possible convertible securities have been included in the calculation.