Earnings Per Share (EPS) Definition - The portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company’s profitability. EPS is a ratio that is widely used by financial analysts, investors and other users to gauge an entity’s profitability. Its purpose is to indicate how effective an entity has been in using the resources provided by the ordinary shareholders, and to assess the entity’s current net earnings. EPS also forms the basis for calculating the price-earnings ratio, which is widely used by investors and analysts to value shares.Earnings per share (EPS) is an important measure of the performance of the company. The equity shareholders (ordinary shareholders as per Ind AS 33) invest their money in the entity as owners of the company. They undertake business risks and financial risks along with all allied systematic and non-systematic risks of the company. Generally, they would expect a higher return as compared to a debt-holder considering the risks involved on their investments.
attributable to ordinary equity holders of the parent entity (the numerator) by the weighted
average number of ordinary (equity) shares outstanding during the period (the denominator).
It can be expressed mathematically as follows:
EPS = Profit/Loss attributable to Equity share holders / Weighted average number of Equity shares outstanding during the periodOR
Eps=(Net income – preference divided)/Average outstanding shares.
Basic earnings per shareBasic earnings per share shall be calculated by dividing profit or loss attributable to ordinary equity holders of the parent entity (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the period.
- (a) profit or loss from continuing operations attributable to the parent entity; and
- (b) profit or loss attributable to the parent entity