residual security

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Residual Security

A security that has the potential to dilute its issuer's earnings per share. For example, a convertible bond can be exchange for so many shares of common stock. If it is exchanged, then the earnings per common share are diluted because there are now more common shares by which to divide earnings. For that reason, a convertible bond is a residual security.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

residual security

A security with the potential for diluting earnings per share. A convertible bond is a residual security because conversion of the bond by an investor will result in more shares of common stock outstanding and a reduction in earnings per share.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
1) Consolidated Financial Results for the First Half Ended March 31, 2010 (millions of yen) First Half Results 2Q Sep 2010 % 2Q Sep 2009 % Net Sales 45,657 (2.9) 47,043 - Operating Income 4,815 (153.3) 1,901 - Ordinary Income 4,858 (165.4) 1,830 - Net Income 3,062 (403.0) 608 - Earnings per Share (y) 4,723.54 939.16 Earnings per Share after Adjustment for Residual Securities (y) - - Consolidated Financial Position 2Q Sep 2010 2Q Sep 2009 Total Assets 71,788 67,291 Net Assets 31,744 31,579 Shlders' Eqty Ratio (%) 40.0 38.2 Net Assets per Share (y) 44,318.93 39,687.65
Those three categories are collateralized mortgage obligations and real estate mortgage investment conduits (CMOs and REMICs), stripped mortgage-backed securities (strips) and CMO-REMIC residual securities (residuals).