What is earnings per share.Publicly
owned companies must report earnings per share (EPS) below the net
income line in their income statements. This is mandated by generally
accepted accounting practices (GAAP). The EPS gives investors a means of
determining the amount the business earned on its stock share
investments. In other words, EPS tells investors how much net income the
business earned for each stock share they own. It's calculated by
dividing net income by the total number of capital stock share. It's
important to the stockholders who want the net income of the business to
be communicated to them on a per share basis so they can compare it
with the market price of their shares.
Private businesses don't
have to report EPS because stockholders focus more on the business's
total net income.
Publicly-held companies actually report two
EPS figures, unless they have what's known as a simple capital
structure. Most publicly-held companies though, have complex capital
structures and have to report two EPS figures. One is called the basic
EPS; the other is called the diluted EPS. Basic EPS is based on the
number of stock shares that are outstanding. Diluted earnings are based
on shares that are outstanding and shares that may be issued in the
future in the form of stock options.
Obviously this is a
complicated process. An accountant has to adjust the EPS formula for any
number of occurrences or changes in the business. A business might
issue additional stock shares during the year and buy back some of its
own shares. Or it might issue several classes of stock, which will cause
net income to be divided into two or more pools - one pool for each
class of stock. A merger, acquisition or divestiture will also impact
the formula for EPS.
that's about is earnings per share. may be useful for you
Tidak ada komentar:
Posting Komentar