Page 381 - FM Integrated WorkBook STUDENT 2018-19

Financial ratios

Investor ratios

4.1 Earnings per share (EPS)

This is the basic measure of a company’s performance from an ordinary
shareholder’s point of view. It is the amount of profit attributable to
each ordinary share.

Profit after interest, tax and preference share dividends
EPS = ––––––––––––––––––––––––––––––––––––––––––––

number of ordinary shares in issue

EPS does not represent actual income of the shareholder and it uses
earnings which are not directly linked to the objective of maximising
shareholder wealth.

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