What is EARNINGS PER SHARE (EPS)?

The amount of net income earned by a company, after PREFERRED STOCK DIVIDENDS have been distributed, which is attributable to each outstanding share of COMMON STOCK. The EPS measure is used as a reflection of earnings power and corporate value; it is typically calculated on a FULLY DILUTED BASIS, which assumes that all outstanding stock OPTIONS are exercised, and any outstanding CONVERTIBLE BONDS are exchanged into new shares. The general computation is given as: where Nl is net aftertax income, Divpref is preferred stock dividends, and CS0/s is the weighted average common stock shares outstanding (including those associated with options and convertible bonds for a fullydiluted calculation).

More On This Topic



Link to This Definition
Did you find this definition of EARNINGS PER SHARE (EPS) helpful? You can share it by copying the code below and adding it to your blog or web page.
Written and fact checked by The Law Dictionary