1. What is Earnings Per Share (EPS)?

Earnings Per Share (EPS) is a key financial metric that measures the amount of a company's profit allocated to each outstanding share of common stock. It serves as an indicator of a company's profitability.

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
• \( Average\ Outstanding\ Shares \) — Weighted average of shares outstanding during the period

Explanation: The formula shows how much profit each common share would receive if all profits were distributed.

3. Importance of EPS Calculation

Details: EPS is a critical metric for investors as it directly impacts stock valuation. Higher EPS typically indicates greater profitability and is often associated with higher stock prices.

4. Using the Calculator

Tips: Enter net income and preferred dividends in dollars, and average shares as a whole number. All values must be positive (shares must be > 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 all potential shares that could be created through options, warrants, or convertible securities.

Q2: What is considered a good EPS?
A: "Good" EPS varies by industry. Compare to competitors and look for consistent growth over time rather than absolute numbers.

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

Q4: How often should EPS be calculated?
A: Typically calculated quarterly with financial statements, and annually for full-year results.

Q5: Can EPS be negative?
A: Yes, if a company has a net loss, EPS will be negative, indicating the company is losing money per share.