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To calculate a company’s EPS, **first subtract any preferred dividends from a company’s net income**. Then divide that amount by how many outstanding shares the company has. EPS is important for calculating the price-to-earnings or P/E valuation ratio. The “E” in that equation refers to EPS.

## How do you calculate EPS on a balance sheet?

The calculation for earnings per share is relatively simple: **You divide the net earnings or net income** (which you find on the income statement) by the number of outstanding shares (which you can find on the balance sheet).

For instance, a company, XYZ, is left with a net income of Rs. 10 lakh and must also pay Rs. 2 lakh as preferred dividends and has Rs. 4 lakh common share outstanding (weighted average) at the current period.

The basic earnings per share (EPS) ratio **represents the amount of profit a company makes on each outstanding share**. Diluted EPS pulls additional convertible securities into the ratio. EPS is a crucial ratio used in many other formulas that analyze a company’s finances.

## How do you find the net income?

To calculate net income for a business, **start with a company’s total revenue**. From this figure, subtract the business’s expenses and operating costs to calculate the business’s earnings before tax. Deduct tax from this amount to find the NI.

Companies can raise their earnings per share **by simply buying back their own shares**, thus reducing the amount of outstanding stock. They need not increase their revenue at all. Some companies manipulate investors into thinking the company is growing more than it actually is by doing this.

## What is the formula for stock price?

To figure out how valuable the shares are for traders, take the last updated value of the company share and multiply it by outstanding shares. Another method to calculate the price of the share is **the price to earnings ratio**.

## What’s the meaning of net income?

For the individual, net income is **the money one receives from a paycheck after accounting for deductions** such as taxes, retirement plan contributions and health insurance. … For a business, positive net income is good because it means that it’s making more money than it’s spending.