term describing an employee who will be completely entitled to pension plan benefits at retirement.

profit accruing to stockholders for each share held. In a simple capital structure, basic earnings per share equals:

figure showing earnings per common share after assuming the exercise of warrants and stock options, and the conversion of convertible bonds and preferred stock (all potentially dilutive securities). Actually, it is more analytically correct to define the term as the smallest earnings per common share that can be obtained by computing earnings per share (EPS) for all possible combinations of assumed exercise or conversion (because antidilutive securities-securities whose conversion would add to EPS-may not be assumed to be exercised or converted). Under accounting rules adopted in 1998, companies must report EPS on two bases: Basic EPS, which does not count stock options, warrants, and convertible securities, and (fully) Diluted EPS, which includes those securities.

practice of excluding a convertible security in the Earnings Per Share (EPS) computation when the effect would be to increase EPS. This is based on the conservatism principle. In the EPS, numerator interest expense (net of tax) is added back to net income. The denominator is increased by the number of shares the convertible bond would be converted into. If the impact of including the convertible bond increased EPS, an antidilutive effect would exist.