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 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 indicator of a company's profitability and is widely used by investors to evaluate stock performance and compare companies. Higher EPS generally indicates greater value.

4. Using the Calculator

Tips: Enter net income and preferred dividends in currency units, and average shares as a whole number. All values must be positive (average 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 universal "good" EPS - it depends on the industry and company growth. Compare to historical EPS and competitors.

Q3: Can EPS be negative?
A: Yes, if net income is negative (the company has a net loss), EPS will be negative.

Q4: Why subtract preferred dividends?
A: Preferred dividends are paid before common shareholders, so they're subtracted to show earnings available to common shareholders.

Q5: How often is EPS calculated?
A: Typically quarterly and annually, matching financial reporting periods.