Answer Posted / soumya
The portion of a company's profit allocated to each
outstanding share of common stock. EPS serves as an
indicator of a company's profitability.
Calculated as:
In the EPS calculation, it is more accurate to use a
weighted average number of shares outstanding over the
reporting term, because the number of shares outstanding
can change over time. However, data sources sometimes
simplify the calculation by using the number of shares
outstanding at the end of the period.
Diluted EPS expands on basic EPS by including the shares of
convertibles or warrants outstanding in the outstanding
shares number.
Earnings per share is generally considered to be the
single most important variable in determining a share's
price. It is also a major component of the price-to-
earnings valuation ratio.
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