What are Earnings Per Share?
Earnings per share (EPS) are earnings from initial investment reported by companies on a quarterly basis. The most common method for calculating earnings per share is dividing profit by the weighted average of the common stock. Earnings per share computations can fall under many categories: continuing operations, discontinuing operations, extraordinary item, and net income. For each category, there is a specific formula for calculating earnings per share. Calculating EPS for net income and continuing operations, for example, requires the following formula: preferred dividends within net income divided by weighted average common stock. EPS can be calculated for the past year or trailing year, the present year or current year, and the future year or forward year. It is an Financial Accounting Standards Board (FASB) requirement that all companies report earnings per share in each and every category. Despite these requirements, companies have great flexibility in how they choose to report
