Basic Earnings per Share

Earnings per Share

In a given fiscal year, a publicly-traded company's profit divided by the number of shares outstanding. This is considered the single most important aspect in determining a share's price and value, because the calculation of earnings per share shows the amount of money to which a shareholder would be entitled in the event of the company's liquidation. In general, earnings per share applies only to common shares. It is calculated thusly:

Earnings per share = (Net income - Preferred dividends) / Average shares outstanding.

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basic earnings per share

Net income less preferred stock dividends during a given period, divided by the average number of shares of common stock outstanding during that period. Compare diluted earnings per share. See also dual presentation.