A balance sheet summarizes the financial assets and liabilities of a company, while the company's income statement shows the company's income and expenditures. To calculate the earnings per share, or EPS, you have to use the common shares outstanding from the balance sheet and the net income and preferred stock dividends from the income statement, not the balance sheet. EPS measures the amount of profit the company has for the year for each share. The higher the EPS for a company, the more profit it brings in for every outstanding common share.
1. Find the company's net profit, dividends paid to the preferred shareholders and outstanding number of common shares on the income statement.
2. Subtract the preferred shareholders' dividends from the company's net profit. For example, if the company has $14 million in net profit and pays $2.3 million in preferred shareholder dividends, subtract $2.3 million from $14 million to get $11.7 million in earnings available to common shareholders.
3. Divide the earnings available to common shareholders by the number of shares outstanding to find the EPS. In this example, if the company has 400,000 common shares outstanding, divide $11.7 million by 400,000 to find the company has $29.25 in EPS.
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