What is Earnings Per Share? When it comes to Wall Street, the Earnings Per Share formula is frequently used. This easy calculation shows how much a company is generating of net profit for each individual share outstanding. The formula for Earnings Per Share is Net Income divided by Shares Outstanding. The first step to calculating your EPS is to identify your Net Income. This is the total money you have coming in (or your gross income) minus all of your https://e4njohordzs.exactdn.com/wp-content/uploads/2021/10/tnw8sVO3j-2.pngistrative expenses and fixed costs (such as insurance, property taxes, interest loans, etc). Your Net Income refers to any profits from revenue left after fixed and variable expenses and any interest payments and taxes before dividends paid to shareholders. Secondly, you have to identify your Shares Outstanding or your diluted EPS. Let’s say that you and your partner both have 10,000 shares in your business of a rental property, and you both decide to not take any salaries from the beginning. However, you issue an extra 20,000 shares in the form of stock options. According to the economics of share delusion, this should increase the diluted shares outstanding in the denominator of the equation. You should have 30,000 shares outstanding. After you identify your Net Income and Shares Outstanding, you’re ready to calculate your Earnings Per Share. Voila!
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