The earnings per share ratio, or simply earnings per share, or EPS, is a corporation’s net income after tax that is available to its common stockholders divided by the weighted average number of shares of common stock that are outstanding during the period of the earnings.

Net income available for common stock is the corporation’s net income after income taxes minus the required dividend for the corporation’s preferred stock, if it has preferred stock outstanding.

Additional information on the calculations and presentation of a corporation’s earnings per share are contained in the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 128, Earnings per Share. It can be read at no cost at www.FASB.org/st.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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