In this video we discuss what is Earnings per Share(EPS)? its formula, calculation along with practical examples.
𝐖𝐡𝐚𝐭 𝐢𝐬 𝐄𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐩𝐞𝐫 𝐒𝐡𝐚𝐫𝐞 𝐨𝐫 𝐄𝐏𝐒?
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Earnings per Share is most commonly used corporate profitability ratio for publicly traded companies.
Earnings per share helps common shareholders to know how much of the available income is associated with the shares they own.
𝐄𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐩𝐞𝐫 𝐒𝐡𝐚𝐫𝐞 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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Earnings per Share = (Net income - Preferred Dividend) / Weighted Average Number of Shares Outstanding
𝐄𝐱𝐚𝐦𝐩𝐥𝐞 𝐨𝐟 𝐁𝐚𝐬𝐢𝐜 𝐄𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐩𝐞𝐫 𝐒𝐡𝐚𝐫𝐞 (𝐄𝐏𝐒)
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Hy-Tec Technology Inc. has the following information –
The net income for year end 2018 – $550,000
The preferred dividends paid in 2018 – $40,000
At the beginning of the year 2018, the common shares outstanding were 60,000 shares.
In the middle of the year, Hy-Tec Technology Inc. issued another 50,000 common shares.
So first we need to calculate weighted average number of common shares outstanding
Weighted average number of common shares = (60,000 * 1) + (50,000 * 0.5) = 60,000 + 25,000 = 85,000 shares.
Now, we will find out the Earnings per Share using its formula
EPS formula = (Net Income – Preferred Dividends) / Weighted Average Number of Common Shares
EPS formula = ($550,000 – $40,000) / 85,000
EPS = $510,000 / 85,000 = $6 per share.
To know more about 𝐁𝐚𝐬𝐢𝐜 𝐄𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐩𝐞𝐫𝐞 𝐒𝐡𝐚𝐫𝐞 𝐨𝐫 𝐄𝐏𝐒, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:- [ Ссылка ]
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