Fundamental Glossary / Earnings & Accounting Concepts
Diluted Earnings
The profit figure used for diluted EPS, adjusted for the after-tax effect of dilutive instruments.
Formula
Basic earnings + the after-tax interest or other cost saved if convertibles converted. The share count rises at the same time.
What it means
If a convertible bond converted, the company would no longer pay that interest. Diluted earnings add that saved interest back, after tax, because the denominator now includes the new shares.
The adjustment stops you from comparing a larger share count with an unadjusted, interest-reduced profit.
How to read it
When diluted earnings and basic earnings are close, the instruments do not change the profit much. The share-count effect may still be large. Look at both.
What to watch
Only dilutive instruments enter the calculation. Anti-dilutive ones, which would increase EPS, are excluded. A loss-making year can flip what counts as dilutive.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.