abhishreshthaa
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EARNING PER SHARE (EPS)
In order to avoid confusion on account of the varied meanings of the term capital employed, the overall profitability can also be judged by calculating earning per share.
Formula:-
Earning Per Share = Net Profit After Interest and Tax
Number of Equity Shares
Significance:-
The earning per share helps in determining the market price of the equity shares of the company.
A comparison of earning per share of the company with another will also help in deciding whether the equity share capital is being effectively used or not. It also helps in estimating the company’s capacity to pay dividend to its equity shareholders.
In order to avoid confusion on account of the varied meanings of the term capital employed, the overall profitability can also be judged by calculating earning per share.
Formula:-
Earning Per Share = Net Profit After Interest and Tax
Number of Equity Shares
Significance:-
The earning per share helps in determining the market price of the equity shares of the company.
A comparison of earning per share of the company with another will also help in deciding whether the equity share capital is being effectively used or not. It also helps in estimating the company’s capacity to pay dividend to its equity shareholders.