Published Aug 16, 2023 Basic Earnings Per Share (EPS) is a measure of a company’s profitability. It is calculated by dividing the company’s net income by the number of outstanding shares. That means it shows how much profit each share of the company’s stock earns. To illustrate this, let’s look at the example of ABC Corporation. ABC Corporation has 1,000,000 outstanding shares and a net income of $10,000,000. That means the company’s basic EPS is $10,000,000/1,000,000 = $10. That means each share of ABC Corporation earns $10 in profit. Basic EPS is an important measure of a company’s profitability and is often used by investors to evaluate a company’s performance. It is also used to compare the performance of different companies in the same industry. That means investors can use it to determine which company is more profitable and thus has a higher potential for growth. In addition, it is also used to calculate the company’s price-to-earnings ratio (P/E ratio), which is another important measure of a company’s performance.Definition of Basic Earnings Per Share (EPS)
Example
Why Basic Earnings Per Share Matters
Financial Economics