Diluted EPS for Convertible Debt Securities: A Primer

Convertible securities can be an attractive source of capital for mature and early-stage companies alike, especially in today’s environment of sustained low interest rates. But their dilutive impact is a potentially complicated issue. For that, we can thank their unique combination of debt and equity-like features.

In this issue brief, we take a closer look at that impact, including:

• A review of the nature of EPS dilution and its effect on convertible debt
• An introduction of the “if-converted method” as the prescribed approach for convertible debt and other similar convertible securities
• Three examples of the if-converted method in action

Discover what makes the if-converted method an elegant way to determine the dilutive impact of convertible securities.

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