What is Basic earnings per share (EPS)?
In short
Basic earnings per share (EPS) is income available to common shareholders (net income less preferred dividends) divided by the weighted average number of common shares outstanding during the period.
Key takeaways
- Shares issued or repurchased during the year are weighted by the time they were outstanding.
- Stock dividends and splits are treated as if they happened at the start of the earliest period presented.
- Public companies present it together with diluted earnings per share.
Where it's tested
FAR: Equity & Earnings Per Share — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company has net income of $600,000 and paid $50,000 in dividends on cumulative preferred stock during the year, none of which were declared. What amount should be used as the numerator for basic EPS?