There are a lot of ratios that help the investor to make any investment decision; one such ratio is the earning per share which depicts the efficiency of a company in generating profits from its business venture.

What is Earning Per Share (EPS)?

EPS measures the amount of net income earned per share of stock outstanding. In other words, this is the amount of money each share of stock would receive if all of the profits were distributed to the outstanding shareholders at the end of the year.

A large company’s profits per share cannot be compared to a small company’s profits per share. A larger company will have to split its earnings among many more shares of stockholders compared to a smaller company.