Earning Per Share (EPS)
Definition: Earnings per share (EPS) is a financial term that refers to the amount of a company's profit that is allocated to each share of common stock. It is a way to measure how much money a company makes for each share of its stock.
Usage Instructions: - EPS is commonly used by investors to assess a company's profitability. - A higher EPS indicates that a company is more profitable, which can be attractive to investors.
Example: If a company earns $1,000,000 in profit and has 1,000,000 shares of common stock, the EPS would be calculated as follows: [ EPS = \frac{\text{Profit}}{\text{Number of Shares}} = \frac{1,000,000}{1,000,000} = 1 ] So, the EPS is $1. This means that for every share of stock, the company made $1 in profit.
Advanced Usage: - Investors often compare EPS figures between different companies in the same industry to determine which company is performing better. - EPS can be reported as basic EPS (which includes only common shares) or diluted EPS (which includes all potential shares, like stock options or convertible bonds).
Word Variants: - Basic Earnings Per Share: This considers only the shares currently available. - Diluted Earnings Per Share: This includes potential shares from stock options or convertible securities.
Different Meanings: - EPS primarily refers to earnings per share in finance. In other contexts, "EPS" can refer to "Expanded Polystyrene," which is a type of plastic foam.
Synonyms: - Profit per share - Earnings per share ratio
Idioms and Phrasal Verbs: - There are no direct idioms or phrasal verbs specific to EPS, but you might hear phrases like "the bottom line" which refers to the final profit or loss of a company, of which EPS is a part.
In summary, "earnings per share" is an important financial indicator that helps investors understand how much profit a company generates for each share of its stock.