Earnings Per Share
Growth in earnings is often monitored with Earnings per Share
(EPS). The EPS expresses the earnings of a company on a "per share" basis. A
high EPS in comparison to other competing firms is desirable. The EPS is
calculated as:
Earnings Available to Common Shareholders / Number of Common Shares Outstanding
EXAMPLE -
Earnings are $ 100,000 and preferred stock dividends of $ 20,000 need to be
paid. There are a total of 80,000 common shares outstanding. Earnings per Share
(EPS) is ($ 100,000 - $ 20,000) / 80,000 shares outstanding or $ 1.00 per share.
