Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company’s profitability.
The following are some of the advantages of earning per share:
- It is the medium through which the EPS of different entities are compared;
- It can be used to evaluate and compare the EPS of the same entity in different years. Thus, it is useful in trend analysis of entity’s EPS.
- It measures performance from perspective of investors and potential investors.
- It points out earnings distributable to ordinary shareholders.
- It is the measure of return to entity’s shareholders