# How is the earnings per share (EPS) calculated?

Q18. Earnings per share (EPS)
How is the earnings per share (EPS) calculated?

A18.
Earnings per share (EPS) = (A) / (B)
Where,
(A) = Net income for common stockholders
= Net income – Dividends to preferred stockholders
(B) = Weighted average number of common shares outstanding

[Fiscal year 20×1]
Net income = $320,000 Dividends to preferred stockholders =$50,000
Net income for common stockholders
= $320,000 –$50,000 = $270,000 Weighted average number of common shares outstanding = 200,000 Earnings per share (EPS) = ($320,000 – $50,000) / 200,000 shares =$270,000 / 200,000 shares = $1.35 per share [Fiscal year 20×2] Net income =$210,000
Dividends to preferred stockholders = $50,000 Net income for common stockholders =$210,000 – $50,000 =$160,000
Weighted average number of common shares outstanding = 100,000
Earnings per share (EPS)
= ($210,000 –$50,000) / 100,000 shares
= $160,000 / 100,000 shares =$1.60 per share

[Note]
Fiscal year 20×2 was more profitable than fiscal year 20×1.