Earnings Per Share (EPS) shows how much profit a company makes for each share. It help investors understand how profitable a company is by dividing its total profit by the number of shares available.
Formula: EPS = Net Profit ÷ Number of Outstanding Shares
Instance: Imagine a company called ABC Ltd.
- Net profit: $1,000,000
- Total outstanding shares: 100,000
Calculation: EPS = $1,000,000 ÷ 100,000
EPS = $10 per share
This means ABC Ltd. made $10 in profit for every share outstanding.