Under what condition would convertible preferred stock be included in the diluted share count?

Convertible preferred stock is included in the diluted share count when it has the potential to be converted into common stock, thereby impacting the total number of shares outstanding. This usually occurs under conditions favorable to the conversion feature.

When the liquidation value of the preferred stock is lower than the current share price, it indicates that the preferred stock is likely to be converted into common stock. Investors would choose to convert their preferred shares into common shares if doing so would yield a higher value than redeeming them for their liquidation value. This conversion would increase the total number of diluted shares outstanding, as preferred stock is converted to common equity.

Thus, when the liquidation value is less than the market price of the common shares, the incentive to convert the preferred stock becomes apparent, leading to its inclusion in the diluted earnings per share calculation.