What Is Earnings Per Share?
A man looking at financial charts on a tablet. EPS, when multiplied by P/E ratio, also helps in arriving at the market share price of a company. (Photographer: Adeolu Eletu on Unsplash)

What Is Earnings Per Share?

This is a series of explainers to educate and inform new investors. In association with Dun & Bradstreet India as knowledge partner.

Earnings Per Share: Definition, Meaning & Basics

Earnings Per Share, or EPS, is calculated by dividing profit available for distribution to common equity shareholders by number of common equity shares outstanding. In other words, EPS shows how much profit per share has been generated by a company in a particular financial year.

EPS is also a reflection of the financial performance of a company.

Companies publish basic EPS and diluted EPS as part of their financial statements. Diluted EPS is calculated after adding convertible instruments into number of existing shares. The convertible instruments are those instruments which will get converted into equity shares on a later date.

EPS also helps in arriving at a company’s Price to Earnings ratio. P/E ratio is computed by dividing the share price of a company by EPS. P/E ratio is also referred to as earnings or price multiple and measures the ratio between share price and earnings of a company.

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