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Basic shares and fully diluted shares are different types of methods to measure the amount of shares investors hold in a company. Basic outstanding shares include the stock held by all company shareholders. Fully diluted shares are the total number of shares if all convertible securities of a company were exercised.

Differences Between Fully Diluted Shares and Basic Outstanding Shares

Basic outstanding shares are the total amount of stock currently held by all of a company's shareholders. Outstanding shares are the company's stock that have been authorized and issued and represent ownership of the company by investors or institutions holding the shares.

Unlike basic outstanding shares, fully diluted shares include all possible sources of conversion to outstanding shares, such as convertible bonds, stock options, stock warrants and convertible preferred stock or debt, assuming these securities were exercised.

Investors should consider the amount of fully diluted shares because it could cause a large discrepancy between fundamental figures, such as a company's earnings per share, or EPS.

To calculate EPS, divide a company's net income, over the past 12 months, by any dividends paid by its shares outstanding. For example, as of June 2015, based on trailing 12-month data, Facebook Incorporated has a net income of $2.795 billion and outstanding shares of 2.25 billion. The trailing 12-month basic EPS is $1.24, or $2.795 billion/$2.25 billion.

On the other hand, based on Yahoo Finance's trailing 12-month data on Facebook Incorporated, the company has a fully diluted EPS of $1.03. Unlike the basic EPS figure, the diluted EPS includes all convertible securities and generally affects the basic EPS figure. Including Facebook's convertible securities decreases its basic EPS figure by $0.21, or $1.24 - $1.03.

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  1. Fully Diluted Shares

    The total number of shares that would be outstanding if all possible ...
  2. Primary Earnings Per Share (EPS)

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  3. Diluted Earnings Per Share - Diluted EPS

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  4. Dilution

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  5. Diluted Normalized Earnings Per Share

    A company's profit less one-time earnings, divided by both outstanding ...
  6. Treasury Stock Method

    The component of the diluted earnings per share denominator that ...
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