## Earnings per Share (EPS)

## Online Calculators **for Business & Investment**

**Earnings per Share (EPS)**

**Earnings per Share** is probably the most widely quoted ratio for listed companies worldwide. Since the goal of business is to earn a profit (earnings) and shareholders are the owners of the firms, the **Earnings per Share** figure gives an immediate reference for valuation of a business. This ratio is so widely quoted as it can have a direct influence on the value of a stock.

What the ratio represents is how much profit is generated per common stock of the business. Simply, you take the net profit figure, adjust it for preference shares (who aren’t ordinarily voting members of the business) and divide this result by the number of shares outstanding.

While not a 100% direct influence on stock price, it is no accident that companies with higher EPS generally have a higher stock price, and vice-versa.

The result is expressed as a currency figure. An **EPS** of 58 cents would mean that for every common stock outstanding there were 58 cents of net profit (earnings). If you multiply the EPS by the number of common shares outstanding then you would have the total reported net profit and preference dividends for the period.

*Earnings per Share (EPS) Calculator*

**The calculator asks for:**

*Net Income*, which is found on the income statement.

*Preference Dividends*, which are generally found on the income statement.

*Weighted Average Number of Common Shares Outstanding*, is found in the Notes to the financial statements.

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