Earnings Per Share Ratio is

$$Earnings\quad Per\quad Share(EPS)\quad Ratio=$$$$\frac { Net\quad Profit }{ Number\quad of\quad Equity\quad Shares } $$

**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.$$Earnings\quad Per\quad Share(EPS)\quad Ratio=$$$$\frac { Net\quad Profit }{ Number\quad of\quad Equity\quad Shares } $$

**Where,****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.__

### Examples

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**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 |

####
**Solution:**

**Net Profit =**EBIT – Interest Expenses – Tax payable

**⇨**Rs. 2500000

**Total Number of Common Equity =**5000000 / 10

**⇨**500000

**EPS =**Net Profit / Total Number of Common Equity

**⇨**2500000 / 500000

**⇨**Rs. 5

**Hence, EPS on common Equity of Rs. 10 each = Rs. 5**