Tweet

Earnings Per Share (EPS)
As the name suggests earnings per share shows how much money each share is making. There are lots of different types of shares; this ratio only includes the number of ordinary shares that the company has authorised.

Earnings per                Net profit after tax
Share              =          _________     

                                    Number of ordinary shares

For example if a firm’s net profit after tax is £10000 and they have 20000 ordinary shareholders earnings per share would be calculated as follows:

Earnings per                £10000
Share              =          _________      =          0.50

                                    20000

As earnings per share are usually expressed in pence in our example the earnings per share is 50p

 

Studying Marketing? Visit www.learnmarketing.net