"If-converted" method within the calculation of fully diluted shares outstanding
Hi,
I am currently learning the calculation of fully diluted shares outstanding, and I have some trouble with this part of the explanation:
"The conversion of in-the-money converts also requires an upward adjustment to the company's net income to account for the foregone interest expense payments associated with the coupon on the convert. This amount must be tax-effected before being added back to net income. Therefore, while conversion is typically EPS dilutive due to the additional share issuance, net income is actually higher on a pro forma basis.".
Are anyone able to describe this in another way, since I really am stuck with this.
This is my first post on the site (I am from Denmark), so please bare with me.
Thank you.
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