Narrow-Based Weighted Average

DEFINITION of 'Narrow-Based Weighted Average'

An anti-dilution provision used to ensure that investors are not penalized when companies are undergoing additional financing or issuing new shares. A narrow-based weighted average takes into account only the total number of outstanding preferred shares for determining the new weighted average price for the old shares.

BREAKING DOWN 'Narrow-Based Weighted Average'

The new weighted average price is adjusted for the preferred shareholder, thus providing protection against dilution. The narrow-based method is the most favorable for investors, as it lowers the price of the preferred shares more than other methods.

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RELATED FAQS
  1. What is the difference between weighted average shares outstanding and basic weighted ...

    Outstanding shares refers to stock that is currently held by investors, including shares held by the public, and restricted ... Read Answer >>
  2. What is the weighted average of outstanding shares? How is it calculated?

    The amount of shares outstanding in a company will often change due to a company issuing new shares, repurchasing and retiring ... Read Answer >>
  3. How do I use Excel to calculate a weighted average?

    Learn about the calculation and interpretation of weighted averages, including how to compute a weighted average using Microsoft ... Read Answer >>
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  5. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference shares and why investors might value them more than common ... Read Answer >>
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