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.

Don’t miss another topic! Get insights about HR advisory, financial reporting, and valuation directly via email: