1. What is Earnings Per Share (EPS)?

EPS (Earnings Per Share) is a 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 and is widely used by investors to evaluate corporate value.

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
• \( Dividends \) — Preferred dividends paid out
• \( Shares\ Outstanding \) — Total number of shares currently held by all shareholders

Explanation: The formula subtracts preferred dividends from net income (since EPS applies only to common stock) and divides by the total number of outstanding shares.

3. Importance of EPS Calculation

Details: EPS is a key metric used by investors to assess a company's profitability on a per-share basis. It's used in the P/E ratio (price-to-earnings) and helps compare companies of different sizes.

4. Using the Calculator

Tips: Enter net income and dividends in dollars, and shares outstanding as a whole number. All values must be valid (net income ≥ 0, dividends ≥ 0, shares > 0).

5. Frequently Asked Questions (FAQ)

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

Q2: What is considered a good EPS?
A: There's no absolute standard - higher is generally better, but comparisons should be made within the same industry and over time.

Q3: 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.

Q4: Why subtract preferred dividends?
A: EPS measures earnings available to common stockholders, and preferred dividends must be paid before common stockholders can claim any earnings.

Q5: How does share buyback affect EPS?
A: Share buybacks reduce shares outstanding, which increases EPS if net income remains constant (fewer shares to divide earnings among).