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Earnings Per Share (EPS) Ratio:

Definition:

Earnings per share ratio (EPS Ratio) is a small variation ofreturn on equity capital ratio and iscalculated by dividing the net profit after taxes and preference dividend by the total number of equityshares.

Formula of Earnings Per Share Ratio:

The formula of earnings per share is:

[Earnings per share (EPS) Ratio = (Net profit after tax Preference dividend) / No. of equity shares(common shares)]

Example:

Equity share capital ($1): $1,000,000; 9% Preference share capital: $500,000; Taxation rate: 50% of netprofit; Net profit before tax: $400,000.

Calculate earnings per share ratio.

Calculation:

EPS = 1,55,000 / 10,000

= $15.50 per share.

Significance:

The earnings per share is a good measure of profitability and when compared with EPS of similarcompanies, it gives a view of the comparative earnings or earnings power of the firm. EPS ratiocalculated for a number of years indicates whether or not the earning power of the company hasincreased.

Earnings Per Share - EPS

What DoesEarnings Per Share - EPSMean?

The portion of a company's profit allocated to each outstanding share of common stock. Earningsper share serves as an indicator of a company's profitability.


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Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstandingover the reporting term, because the number of shares outstanding can change over time.However, data sources sometimes simplify the calculation by using the number of sharesoutstanding at the end of the period.

Diluted EPS expands on basic EPS by including the shares of convertibles or warrantsoutstanding in the outstanding shares number.

Watch: Earning Per Share

Investopedia explainsEarnings Per Share - EPSEarnings per share is generally considered to be the single most important variable indetermining a share's price. It is also a major component used to calculate the price-to-earningsvaluation ratio.

For example, assume that a company has a net income of $25 million. If the company pays out$1 million in preferred dividends and has 10 million shares for half of the year and 15 millionshares for the other half, the EPS would be $1.92 (24/12.5). First, the $1 million is deducted fromthe net income to get $24 million, then a weighted average is taken to find the number of sharesoutstanding (0.5 x 10M+ 0.5 x 15M = 12.5M).

An important aspect of EPS that's often ignored is the capital that is required to generate theearnings (net income) in the calculation. Two companies could generate the same EPS number,but one could do so with less equity (investment) - that company would be more efficient atusing its capital to generate income and, all other things being equal, would be a "better"company. Investors also need to be aware of earnings manipulation that will affect the quality of

the earnings number. It is important not to rely on any one financial measure, but to use it inconjunction with statement analysis and other measures.

A company's profit, or earnings, divided by

the number of outstanding shares. For


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instance, if a company earned $10 million in

a quarter and had 5 million outstanding

shares, their earnings per share (EPS) wouldbe $2. Earnings per share is a highly

referenced metric by those measuring a

company's profitability growth or decline

over time. Earnings per Share

Definition

EPS. Total earnings divided by the number ofshares outstanding. Companies often use a weighted

average ofsharesoutstanding over the reporting term. EPS can be calculated for the previous year

("trailing EPS"), for the current year ("current EPS"), or for the coming year ("forward EPS"). Note that

last year's EPS would be actual, while current year and forward year EPS would be estimates.

Read more: http://www.investorwords.com/1623/Earnings_per_Share.html#ixzz15z3dr03F

Earnings per share (EPS)

A company'sprofit divided by its number of common outstanding shares. If a company earning $2

million in one year had 2 million common shares ofstockoutstanding, its EPS would be $1 per share. In

calculating EPS, the company often uses a weighted average of shares outstanding over the reporting

term. The one-year (historical or trailing) EPS growth rate is calculated as the percentage change in

earnings per share. The prospective EPS growth rate is calculated as the percentage change in this year'searnings and the consensus forecast earnings for next year.

Copyright 2004, Campbell R. Harvey.All

Rights Reserved. earnings per share (EPS)


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Definition

Net income of a firm divided by the number of its outstanding shares the sharesheld by the stockholders

(shareholders). Primary earnings per share (also called fully diluted EPS) takes into account all shares

currently outstanding,plus the number of shares that would be outstanding if all convertible bonds and

convertible preferred stock(preference shares) were exchanged forcommon stock(ordinary shares). Also

called net income per share. Formula: (Total revenue - Total expenses) Number of outstanding shares.

Read more: http://www.businessdictionary.com/definition/earnings-per-share-EPS.html#ixzz15zIljU4q

earnings per share (EPS)

An earnings measure calculated by subtracting the dividends paid to holders of preferred stock from the

net income for a period and dividing that result by the average number of common shares outstanding

during that period. EPS is the amount of reported income, on a per-share basis, that a firm has available

to pay dividends to common stockholders or to reinvest in itself. As with other financial measures, EPS

can vary with differing accounting techniques; therefore, reported EPS may give a very misleading signal

as to how the firm is really doing. Also called income per share, net income per share. See also basic

earnings per share, diluted earnings per share.

earnings per share00

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