1. What is Earnings Per Share (EPS)?

EPS is a financial metric that indicates how much profit a company makes for each share of its stock. It's calculated by dividing net income minus preferred dividends by the average number of outstanding shares during the period.

2. How Does the Calculator Work?

The calculator uses the basic EPS formula:

Where:

• Net Income — Company's total earnings after all expenses and taxes
• Preferred Dividends — Dividends paid to preferred shareholders
• Average Shares Outstanding — Weighted average of shares during the period

Explanation: The formula shows the portion of a company's profit allocated to each outstanding share of common stock.

3. Importance of EPS Calculation

Details: EPS is a key metric for investors to evaluate a company's profitability and compare it with other companies. Higher EPS generally indicates greater value as investors will pay more for higher earnings.

4. Using the Calculator

Tips: Enter net income and preferred dividends in dollars, and average shares outstanding as a whole number. All values must be positive, with shares > 0.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between basic and diluted EPS?
A: Basic EPS uses current shares outstanding, while diluted EPS accounts for potential shares from options, warrants, and convertible securities.

Q2: What is considered a good EPS?
A: There's no absolute standard - compare to industry peers and historical performance. Higher is generally better, but growth rate matters more than absolute value.

Q3: Why subtract preferred dividends?
A: Preferred dividends are paid before common shareholders, so they're excluded to show earnings available to common shareholders.

Q4: How often is EPS calculated?
A: Typically quarterly and annually, matching financial reporting periods.

Q5: Can EPS be negative?
A: Yes, if the company has a net loss (negative net income), EPS will be negative.