Earnings Per Share Ratio

Published on August 01, 2020
Earnings Per Share Ratio is a type of Profitability Ratio that determines the net profit of the company per equity share wise. This ratio breaks down the net profit of a company to the level of equity shares.
$$Earnings\quad Per\quad Share(EPS)\quad Ratio=$$$$\frac { Net\quad Profit }{ Number\quad of\quad Equity\quad Shares } $$
  • Net Profit = Net Sales – (Cost of Goods Sold + Operating Expenses + Depreciation /Amortization + Interest Expenses + Tax paid)
  • And Number of Equity Shares is the total count of common share of a company (excluding Preference Shares)
  • Earnings per Share Ratio is in the form of an amount (Rs.) i.e. an EPS of 5 implies earning of Rs. 5 on each common equity.

Significance and Interpretation

  • EPS Ratio gives a simple and straight formula for the investors that are concerned only with returns on the company.
  • The value of EPS alone cannot be used to compare the return of two companies as the Price of Common Equity may differ from company to company.


Example 1: 

Given below are few details of M/S XYZ Ltd., use them an calculate the EPS Ratio for M/S XYZ Ltd.
Particulars Amount (in Rs.)
Equity Share Capital @ Rs 10.00 each 5000000.00
EBIT (Earnings Before Interest and Taxes) 4000000.00
Interest Expenses 1000000.00
Tax Payable 500000.00


Net Profit = EBIT – Interest Expenses – Tax payable
 Rs. 2500000
Total Number of Common Equity = 5000000 / 10 
EPS = Net Profit / Total Number of Common Equity 
  2500000 / 500000 
  Rs. 5
Hence, EPS on common Equity of Rs. 10 each = Rs. 5

About me

ramandeep singh

My name is Ramandeep Singh. I authored the Quantitative Aptitude Made Easy book. I have been providing online courses and free study material for RBI Grade B, NABARD Grade A, SEBI Grade A and Specialist Officer exams since 2013.

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