Free Financial Accounting Tutorial – Earnings Per Share (EPS)
Earnings Per Share: Earnings per Share is important terminology every learner of finance and accounts need to learn. Earnings per share is common corporate terminology used to carry out corporate value. Earnings Per Share (EPS) is basically calculated as net profit attributable to equity shares divided by number of equity shares outstanding as on particular date. Earnings per share is significant financial parameter used to know Company’s financial health. Higher EPS reflects greater profitability from the company.
EPS of the company helps investing company the most suitable investment option. With EPS one can determine company’s existing and future stock value. EPS is used to calculate Price Earnings Ratio which is ultimately used to analyze share price of the company. Year on year steadily increasing EPS is considered to be good investment option.
There are basically 2 types of EPS i.e. Basic EPS and Diluted EPS.
For calculation of basic EPS one need to divide company’s profit by number of shares outstanding.
For calculation of diluted EPS one need to consider all possible dilutions like when options are converted into shares.
Diluted EPS is used when company is likely to witness a dilution because of Employee Share option Plan (ESOP) or other similar cases,
Thus to conclude Earnings per share with other financial parameters give idea about company’ profitability and market performance.
Who this course is for:
- This course is for CA, MBA, CIMA, CWA, CMA ,Bcom , Mcom Students , Learners of Finance & Accounts etc.
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