Published by Gulshan Sachdev on 22/03/2019 at 10:05 PM

What is Earnings Per Share ?

Earnings or profits generated by the company is usually shared with the owners. However, the profit of a public company is accumulated and not shared with the owners (share holders). This accumulated or retained profit is utilized for business operation, expansion and exigency. Even though it is not shared, but the accumulated profits and projected future profits (which the company will generate) is the value of the company, which creates demand of its shares.

We can calculate the profit which each share holder will get by diving the total profits by total number of shares. In our case Profit & Loss Statement Simplified the profit for a month was 10000/-. Assuming there are total 20000 shares, earnings per share would be = 10000/20000

 = 0.5 Rs But EPS is always calculated for a years earning, hence we cannot take one month earnings in calculation. Assuming with the same scale, the annual profits of the coffee shop is 120000/- (10000 x 12 = 120000). EPS for this coffee shop would be 120000/20000 = 6 Rs