A firm with securities outstanding that holders can convert into, or exchange for, shares of common stock may report two earnings-per-share amounts:

Question

Quizplus · Accepted Answer

The two earnings-per-share amounts that a firm with convertible securities outstanding may report are basic earnings per share and diluted earnings per share. Basic earnings per share is calculated by dividing the net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the impact of potential dilutive securities such as convertible bonds or stock options if they were converted or exercised, and therefore reflects a lower earnings per share figure.

A Firm with Securities Outstanding That Holders Can Convert Into