Financial modelling terms explained Show
Earnings per share, or EPS, is the amount of profit a company earns per share of its stock. What Does EPS Stand For?Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. EPS is calculated by dividing a company's net income by the number of shares outstanding. How Do You Calculate EPS?There are a few different ways to calculate EPS, but the most common is to use net income and divide it by the number of shares outstanding. This will give you the EPS for the period. You can also calculate it using diluted EPS, which takes into account all potential shares that could be outstanding, such as options and warrants. This will give you a more accurate number, as it takes into account all potential shares that could be issued. What Is the Difference Between EPS and Dividends?The main difference between EPS and dividends is that EPS is a measure of a company's profitability and dividends are a distribution of a company's profits to its shareholders. EPS is calculated by dividing a company's net income by the number of shares outstanding, while dividends are calculated by dividing a company's net income by the number of shares outstanding multiplied by the dividend payout ratio. What Is the Difference Between EPS and Dividends per Share?EPS is the acronym for earnings per share, which is a company's net income divided by the number of outstanding shares. EPS is a popular measure of a company's profitability. Dividends per share (DPS) is the dividend paid to shareholders, divided by the number of outstanding shares. DPS is a popular measure of a company's ability to pay dividends. What Is the Difference Between EPS and Net Income?The two most common measures of a company’s profitability are earnings per share (EPS) and net income. EPS is calculated as net income divided by the number of shares outstanding, while net income is the company’s total income minus its total expenses. There are a few key differences between EPS and net income. First, EPS includes only the company’s net income from its continuing operations, while net income includes all of the company’s income, both from continuing and discontinued operations. Second, EPS reflects the number of shares outstanding at the end of the period, while net income reflects the number of shares outstanding at the beginning of the period. This can be important when a company has issued new shares over the course of the period, as the net income will be spread out over more shares and the EPS will be lower. Finally, EPS is often viewed as a more reliable measure of profitability than net income, as it takes into account the number of shares outstanding. This is especially important for companies with a high number of shares outstanding, as their net income can be quite small when compared to their total revenue. Who Uses EPS?There are a variety of stakeholders that use EPS information in financial modelling. Management, investors, and creditors are the main users of EPS information. Management uses EPS to make decisions about how to allocate resources and to assess the performance of the company. Investors use EPS to assess the attractiveness of an investment in a company. Creditors use EPS to assess the likelihood of a company defaulting on its debt. Abstract We develop a simple approach to valuing stocks in the presence of learning about average profitability. The market-to-book ratio (M/B) increases with uncertainty about average profitability, especially for firms that pay no dividends. M/B is predicted to decline over a firm's lifetime due to learning, with steeper decline when the firm is young. These predictions are confirmed empirically. Data also support the predictions that younger stocks and stocks that pay no dividends have more volatile returns. Firm profitability has become more volatile recently, helping explain the puzzling increase in average idiosyncratic return volatility observed over the past few decades. Journal Information The Journal of Finance publishes leading research across all the major fields of financial research. It is the most widely cited academic journal on finance and one of the most widely cited journals in economics as well. Each issue of the journal reaches over 8,000 academics, finance professionals, libraries, government and financial institutions around the world. Published six times a year, the journal is the official publication of the American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics. JSTOR provides a digital archive of the print version of The Journal of Finance. The electronic version of the The Journal of Finance is available at http://www.interscience.wiley.com/. Authorized users may be able to access the full text articles at this site. Publisher Information Wiley is a global provider of content and content-enabled workflow solutions in areas of scientific, technical, medical, and scholarly research; professional development; and education. Our core businesses produce scientific, technical, medical, and scholarly journals, reference works, books, database services, and advertising; professional books, subscription products, certification and training services and online applications; and education content and services including integrated online teaching and learning resources for undergraduate and graduate students and lifelong learners. Founded in 1807, John Wiley & Sons, Inc. has been a valued source of information and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Wiley has published the works of more than 450 Nobel laureates in all categories: Literature, Economics, Physiology or Medicine, Physics, Chemistry, and Peace. Wiley has partnerships with many of the world’s leading societies and publishes over 1,500 peer-reviewed journals and 1,500+ new books annually in print and online, as well as databases, major reference works and laboratory protocols in STMS subjects. With a growing open access offering, Wiley is committed to the widest possible dissemination of and access to the content we publish and supports all sustainable models of access. Our online platform, Wiley Online Library (wileyonlinelibrary.com) is one of the world’s most extensive multidisciplinary collections of online resources, covering life, health, social and physical sciences, and humanities. Rights & Usage This item is part of a JSTOR Collection. Which of the following is a profitability measure that uses the number of outstanding shares?EPS (Earnings Per Share): EPS is the measure of a company's profitability per outstanding share of common stock. You will often see two EPS measures at the bottom of an income statement — basic and diluted. Basic EPS is computed by dividing a company's net income by the number of outstanding common shares.
Which of the following is a profitability measure that uses the number of outstanding shares in the calculation quizlet?E. Price-earnings ratio. Which of the following is a profitability ratio that uses the number of outstanding shares in the calculation? This ratio uses the market price per share of the stock and the earning per share.
What does the P E ratio tell you?The price/earnings ratio, also called the P/E ratio, tells investors how much a company is worth. The P/E ratio simply the stock price divided by the company's earnings per share for a designated period like the past 12 months. The price/earnings ratio conveys how much investors will pay per share for $1 of earnings.
What is PE ratio and EPS?Earnings per share: This measure is calculated by taking the net income earned by the corporate and dividing it by the number of outstanding shares issued. Price / Earnings ratio: P/E ratio is measured by dividing the share price by the earnings per share. P/E and EPS are two of the most frequently used ratios.
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Which of the following is a profitability measure that uses the number of outstanding?
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