Calculating earnings per share (EPS) involves 2 different items–net income and total common shares outstanding. EPS is calculated as net income divided by total common shares. It represents the portion of a company’s profit that can be allocated to each outstanding common share of the company. The higher the earnings per share of a company, the better is its profitability.
Companies that are able to increase their earnings per share year after year are desirable.
Navya’s company, Roma has issued 10,000 shares of common stock and the net profit earned during the first quarter is Rs.8,11,500. Hence, the EPS is Rs.81.15 (8,11,500 / 10,000).