Earnings Per Share
Accounting glossary · Understand, connect, apply
Basic earnings per share (EPS) measures earnings attributable to common shareholders per weighted-average common share outstanding during a period.
Example
Net income of 120,000 less preferred dividends of 20,000, divided by 50,000 weighted-average common shares, gives basic EPS of 2.
Remember the difference
Use weighted-average shares, not simply year-end shares. Diluted EPS considers potential common shares under the relevant standard.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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