what is a "diluted share"?

Question

This is the context of the question : "Apple announced preliminary fourth quarter financial results, with revenue of $4.84 billion and a net profit of $546 million, or $.62 per diluted share."

Answer 1

Many companies have securities (Preferred Stock, bonds, options, etc.) that can be converted to common stock. 'Diluted shares' would include these 'potential' common shares as well as the shares already issued.

Answer 2

Diluted share EPS is the lowest possible EPS, in other words the worst case scenario. To fully dilute the shares, all of the convertible stock and stock options would have to be exercised therefore expanding the total number of outstanding shares to the maximum. It is used to provide a common ground for earnings. For example of Company A had net profit of $100 and there were only a hundred shares outstanding, then the EPS would be $1.00. Now what if Company A still had $100 of net profit, had 100 shares outstanding and options worth up to 100 shares outstanding...the diluted EPS would be $0.50.

Answer 3

In this case, I believe the dilluted share would take into account the outsanding stock options that have vested but not been redeemed. The company has to assume any vested stock options as actual "shares" from an equity perspective. The other thing that there could be would be preferred shares that covert or have a common share component. If that's the case, they too would 'dillute', i.e. increase the total outstanding shares in reality, the common stock.

I'm guessing it's not preferred thought because that would normally be more in a private equity scenario. So, without doing more research, I'd bank on it being the outstanding vested stock options.

Hope it helps.

Cheers,

TBG.