How can you calculate earnings per share?


Quick Answer

To calculate earnings per share, evaluate the total income generated by the company and the number of shares issued. Subtract dividend paid from net income, and divide by the average number of outstanding shares.

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Full Answer

  1. Calculate earnings

    Calculate the total earnings of the company. Use the statement of comprehensive income and other official documents to gather the figures required. Use revenue and expense statements to calculate net profit and to showcase the earnings of the company.

  2. Determine number of shares

    To calculate the number of shares issued by the company, analyze the previous year’s audited financial statements. The statements generally list number of shares issued as of the last financial year. Add any further shares issued by the company during the ongoing financial year for a current total.

  3. Obtain dividend of preference shares, and evaluate

    Use company data to get the dividend paid out to preference shares. Subtract this sum from the net income to arrive on the earning that is "leftover." Finally, divide this number by the number of outstanding shares to calculate earnings per share. The average is taken to accommodate the variance in the sale and purchase of stocks. Using figures from step 1 and step 2, evaluate with the formula (earnings per share = (net income - dividend on preference shares) / average outstanding shares).

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