Cash is king! But profit generates excess cash. What is my company Earnings Per Share? Understanding underlying business profitability is critical to a healthy and sustainable small business. Earnings per share is another measure to help you understand this profitability over time.
Earnings Per Share
EPS assesses how much revenue is earned in relation to its underlying equity amounts. The higher the EPS, the better the general health of the business. EPS is normally only assessed for publicly listed companies. But we make some assumptions to derive it. It is not possible for Jazoodle to identify how many shares may have been issued by a company. For this reason, we assume total shareholders equity as being the sum of paid up capital, retained earnings, and current earnings. This may not be accurate, but if used consistently over time, should provide a great way of understanding underlying relative business performance.
What does it mean?
For private companies, Earnings Per Share is not an exact science. The measure tells you that for every unit of money your business has in owner’s equity, you are earning XX units back. We do make assumptions however, that can derive a consistent indicator as to how efficient your business is in generating revenues relative to the total amount of equity within your business. Although not scientific, it can be used as a good barometer as to the progress of your business over time. Check your earnings per share now with Jazoodle
How we derive EPS?
Net Total Profit Divided by:
Total Equity (amount)
eg: Net Profit $30,000, Total Equity $5,000
EPS equals 30,000 / 5,000 [times 100] = $6
How Can I Improve My Earnings per Share?
If your company earnings per share is reducing, there are a number of things you can assess to identify the cause, and then improve the score. As always, please work with your accountant or business advisor for individual advice for your business. EPS is affected by the following:
- Sales revenues.
- Cost of goods (direct costs)
- Overheads or expenses
- Other non operating income or expenses
- Financial structure of your company