Which one of the following is the correct calculation of fully diluted shares outstanding for a firm with in- the-money options, warrants, as well as convertible preferred and convertible debt?
A) Out of the money options and warrants plus in the money convertible preferred and debt
B) Basic shares outstanding + in-the-money options and warrants + in the money convertible preferred and debt
C) In the money options and warrants + in the money convertible preferred and debt
D) Basic shares outstanding + out of the money options and warrants.
E) Basic shares outstanding + convertible preferred and debt

Question

Quizplus · Accepted Answer

Fully diluted shares outstanding includes all potential sources of dilution, including in-the-money options, warrants, convertible preferred stock, and convertible debt. This calculation is done by adding the basic shares outstanding to the number of shares that would be issued if all outstanding options and warrants were exercised, as well as the number of shares that would be issued if all convertible securities were converted into equity. Therefore, the correct choice would be B.

Which One of the Following Is the Correct Calculation of Fully