Earnings per share
From Wikipedia, the free encyclopedia
Earnings per share (EPS) are the earnings returned on the initial investment amount.
In the US, the Financial Accounting Standards Board (FASB) requires companies' income statements to report EPS for each of the major categories of the income statement: continuing operations, discontinued operations, extraordinary items, and net income.
[edit] Calculating EPS
The EPS formula does NOT include preferred dividends for categories outside of continued operations and net income. Earnings per share for continuing operations and net income are more complicated in that any preferred dividends are removed from net income before calculating EPS. Remember that preferred stock rights have precedence over common stock. If preferred dividends total $100,000, then that is money not available to distribute to each share of common stock.
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- Earnings Per Share (Basic Formula)
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- Earnings Per Share (Net Income Formula)
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- Earnings Per Share (Continuing Operations Formula)
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Note: Only preferred dividends actually declared in the current year are subtracted. The exception is when preferred shares are cumulative, in which case annual dividends are deducted regardless of whether they have been declared or not. Dividends in arrears are not relevant when calculating EPS.
[edit] Also see
[edit] External links
- EPS Manipulation, An example of how conglomerates were used in the 1960s to manufacture apparent earnings growth
- How to Estimate EPS Growth with Excel, A simple spreadsheet example for estimating future EPS based on past earnings
