Earnings Per Share (EPS)
Definition
A company's net profit divided by the number of shares outstanding, showing profit attributable to each share. It is a core input to valuation measures such as the P/E ratio.
Formula
EPS = Net profit ÷ Weighted average shares outstanding
Related Terms in Financial Analysis
Working Capital Management
The management of short-term assets and liabilities — inventory, receivables, payables and cash — to keep a business liquid and operating smoothly without tying up more funds than necessary.
Contribution Margin Ratio
Contribution margin as a percentage of sales, showing how much of each sales unit is left after variable costs to cover fixed costs and profit. It drives break-even and pricing analysis.
Margin of Safety
The gap between actual or budgeted sales and the break-even point, showing how far sales can fall before the business makes a loss. A larger margin of safety means lower risk.
Operating Leverage
The degree to which a business's costs are fixed rather than variable. High operating leverage means profits rise fast as sales grow past break-even — but fall just as fast when sales decline.
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