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SHAREHOLDER RATIOS
EARNINGS PER SHARE

Introduction

As the name suggests earnings per share shows how much money each share is making. There are lots of different types of shares; this ratio only includes the number of ordinary shares that the company has authorised.

Calculating Earnings Per Share

To calculate the earnings per share you will need to find out the number of ordinary shares that have been issued and the net profit after tax for the firm. Divide the net profit after tax by the number of ordinary shares to obtain the earnings per share.

Earnings per                Net profit after tax
Share              =          _________     

                                    Number of ordinary shares

 

 

Example Calculation

For example if a firm’s net profit after tax is £10000 and they have 20000 ordinary shareholders earnings per share would be calculated as follows:

Earnings per                £10000
Share              =          _________      =          £0.50

                                    20000

 

As earnings per share are usually expressed in pence in our example the earnings per share is 50p

 

 

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