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Earnings per share: EPS
This is, perhaps, the fundamental investor ratio: in this case, we work out the average amount of profits earned per ordinary share issued. The formula is:
| Earnings per share | = | Profit available to equity shareholders |
| Average number of issued equity shares |
Here are the extracts from the accounts that we need and they are followed by the results for one of the two years, you should calculate the EPS for the other year.
The Carphone Warehouse
Consolidated Profit and Loss Account | 31 March 2001 | 25 March 2000 |
|---|
| Profit for the financial period (£) | 38,159,000 | 16,327,000 |
| Weighted average number of issued shares | 833,000,000 | 600,000,000 |
| | 31 March 2001 | 25 March 2000 |
|---|
| EPS | 38,159,000
833,000,000 | £0.04648 | _____________ | |
Did you get this?
The good news for investors here is that the average earnings per issued ordinary share has almost doubled over the two years. Notice that the number of shares issued has increased from 600 million to 833 million, so this really is a good result as profits available for shareholders must have increased significantly too from £16,327,000 to £38,159,000.
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