Advanced English Dialogue for Business – Fully diluted earnings per share

Listen to a Business English Dialogue About Fully diluted earnings per share

Jade: Hi Stella! Have you heard of fully diluted earnings per share?

Stella: Hi Jade! Yes, fully diluted earnings per share is a financial metric that calculates the earnings per share of a company while assuming that all potential convertible securities, such as stock options and convertible bonds, are converted into common stock.

Jade: Right. It provides a more conservative measure of earnings per share by including the potential dilution effect of these convertible securities on the company’s outstanding shares.

Stella: Exactly. By considering all potential dilutive securities, investors can get a clearer picture of a company’s earnings potential and make more informed investment decisions.

Jade: That’s correct. Fully diluted earnings per share is particularly important for companies with a significant number of outstanding convertible securities, as it reflects the impact of these securities on the company’s overall profitability.

Stella: Absolutely. It helps investors assess the true earnings potential of a company and compare its performance with competitors on a more equitable basis.

Jade: Right. Companies often provide both basic and fully diluted earnings per share figures in their financial reports to give investors a comprehensive view of their earnings performance.

Stella: Yes, and analysts and investors use fully diluted earnings per share as a key metric when evaluating a company’s financial health and growth prospects.

Jade: That’s true. By understanding and analyzing fully diluted earnings per share, investors can make more informed decisions about buying, holding, or selling a company’s stock.

Stella: Absolutely. It’s an essential tool for evaluating a company’s earnings and understanding the potential impact of convertible securities on its shareholder value.

Jade: Right. And it’s crucial for investors to consider fully diluted earnings per share alongside other financial metrics and factors when making investment decisions to ensure a comprehensive assessment of a company’s financial performance and prospects.