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WHAT ARE EARNINGS PER SHARE
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Today we are going to cover a topic that exists in every business large or small. If there is no earnings, than your business has a problem and soon you will have no business at all.
Earnings are just a nice word for profit. So earnings are picked up at the end of the income statement. Obviously, earnings or profit is calculated by your income less your expenses. Thus if your income is 50 000 and your expenses is 40 000, your profit or earnings will be 10 000.
Now, what are earnings per share? Let’s say we have 10 000 shares outstanding in our business, then our earnings per share would be 10 000 profit or earnings divided by our number of shares outstanding, which is 10 000. So our earnings per share are exactly 1.
What are outstanding shares etc. is a topic for another day. I just wanted you to understand this basic term as we will build on this in the future.
The Wealth Builder Final Thought: Earnings per share are calculated as companies have multiple shareholders or owners. Some own thousands of shares other millions. So this is an easy way for an investor to see the growth on his investment.