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What are Basic Earnings Per Share?
Basic Earnings per share (Basic EPS) tells an investor how much of the company's profit belongs to each share of stock. If company ABC reported earnings of $100 million dollars and had 20 million shares outstanding, the basic EPS would be $5 ($100 million earnings ÷ 20 million shares outstanding = $5 per share). The figure is important because it allows analysts to value the stock based on the price to earnings ratio (or p/e ratio for short).
Basic EPS are not as accurate as Diluted EPS.
Additional Information:
Diluted
Earnings per Share (EPS)
What is the Price to Earnings (P/E) Ratio
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