Diluted shares outstanding

Diluted shares outstanding represents the total number of common shares that will be outstanding after all possible sources of conversion are exercised, such as convertible preferred stocks, debt instruments, bonds, stock options, and warrants. 

Diluted shares outstanding are calculated on the basis of not only securities, which are already issued, but also those that could be claimed by a conversion. Diluted shares outstanding are used by the company for Diluted earnings per share calculation.