Earnings per share

From ACT Wiki
Jump to: navigation, search

Financial ratio analysis - performance ratios.

(EPS or eps).

EPS measures the annual profits earned for each ordinary share in a company.

In simple terms, EPS is calculated as:

Profits ÷ number of shares

Defining these terms more strictly, they are:

Profit attributable to ordinary shareholders ÷ Weighted average number of shares in issue during the period.

Profit after tax attributable to ordinary shareholders is often known as 'earnings' or 'net profit'.

EPS example

Earnings for the period are £40 million and the number of shares is 50 million.

EPS = £40m / 50m

= £0.80 (= 80 pence)

Relevant accounting standards for the consistent calculation and reporting of Earnings per share include IAS 33 and Section 1 of FRS 102.

See also