It stands for earnings per share; a financial ratio that measures the relationship between a company’s profits and the ownership stake of its common shareholders. It is typically reported on the income statement after net income. This ratio usually come in two different forms: basic EPS and diluted EPS. The first form is given by the following:
Generally, EPS represents the amount of income available to common shareholders for each share of common stock outstanding. For example, a company with 1 million shares outstanding has reported a net income of $2 million. Its basic EPS is then:
Basic EPS= 1 million/ $2 million = $0.5 per share.
