*An earnings per Share (EPS)*which is abbreviated with the EPS are part of a company's profit allocated to each stock that is outstanding. EPS it is the most widely used indicator to assess the profitability of a company.

Profit per share is a measure of the profitability of a very useful and when compared to EPS on the company's Earnings per share, this will give a very clear picture about the power of profitability between companies concerned with the comparison.

Please note that the comparison must be a moving companies in the same industry types. EPS when calculated over several years, then it would indicate whether the profitability of the company is getting better or getting worse. Investors typically Fund will invest in companies whose Earnings per Shares are on the rise.

Growth in EPS (Earning per Share) is an important measure of the company's performance because it indicates how much of the money generated for the company's shareholders. Not only because of the changes but also the profit after all impact the issuance of new shares.

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**The Formula of EPS**

EPS (Earning per Share or Sheets per share) is calculated by dividing the net profit after tax and the dividends distributed by the number of outstanding shares. Earnings per Share can be expressed with the formula EPS below:

*EPS = (net profit after tax – Dividends)/total number of outstanding shares*

If there are changes in capital structure (e.g. changes in the number of shares) during the reporting period, the then outstanding shares must be calculated based on the weighted average shares (weighted average share) that circulated during the current year.

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**Examples of Cases the calculation of the Earnings per share**

The following is an example of the calculation of the Earnings per shares by using the EPS Formula mentioned above.

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**Example 1**

The company had XXZZ shares outstanding by as much as 1 million pieces in the year 2016, net profit after tax was $ 1 billion. Company A then decided to distribute a dividend of 10% or $ 100 million to shareholders. What is the Earning Per Share (EPS) or Profit per sheet the shares?

**Note:***The number of outstanding shares = 1 million shares*

*= Net profit after tax of $ 1 billion*

*The Dividend distributed = $ 100 million*

*Earnings per share =?*

**Answer:**

*The earnings per share (EPS) = (net profit after tax – Dividends)/total number of outstanding shares*

*Earnings per share (EPS) = ($ 1 billion – $ 100 million)/1 million*

*The earnings per share (EPS) = $ 900 million/1 million*

*Earnings per share (EPS ) = $ 900*

*So Earnings per share or Earning per Share (EPS) of PT. XXZZ is amounting to*

**$ 900****Example 2**

Xyz Company has outstanding shares as much as 1.5 million sheet with details as follows:

01 January 2016, outstanding shares by as much as 1 million sheets of 01 July 2016, the addition of new shares for as much as 500,000 sheets. Net profit after tax of PT. AABB is $ 1 billion. Share dividends which will be given to shareholders is of 10% or $ 100 million of net profit after tax. What is the Earning per Share or Profit per sheet the shares?

**Note:**

*Net profit after tax = IDR 1 billion,-*

*the Dividend distributed = $ 100 million*

The number of outstanding shares = 1,250,000 sheet.

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*Calculate by means of weighted average as below:*

The Number Of Shares | Long cycle(month) | Weights (Weight) | The averageWeighted |

1 million | 6 | 6/12 = 0.5 | 500,000 |

1.5 million | 6 | 6/12 = 0.5 | 750,000 |

Weighted average number of | 1. 250. 000 |

**Answer:**

*The earnings per share (EPS) = (net profit after tax – Dividends)/total number of outstanding shares*

*Earnings per share (EPS) = ($ 1 billion – $ 100 million)/1,250,000*

*The earnings per share (EPS) = $ 1,250,000/900 million*

*Earnings per share (EPS ) = $ 720*

So Earnings per shares or Earning per Share (EPS) of PT. XXZZ is amounting to

**$ 720**

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**Assessment of EPS (Earning per Share or Earnings per share)**

Generally, a high Profit per share indicate a better profitability compared to Earnings per share. This means that the company can generate a higher profit for distribution to the shareholders. Even so, investors do not only pay attention to the value of Earnings per shares this alone to make a decision to buy or not to buy shares in the company in question, because in essence this EPS can be turned into high when the number of outstanding shares is reduced.

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