From the course: Financial Accounting Foundations

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Earnings per share

Earnings per share

From the course: Financial Accounting Foundations

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Earnings per share

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- For large companies, the most commonly discussed net income number is earnings per share, affectionately known as EPS. Earnings means the same thing as net income. So earnings per share is just the amount of net income divided by the number of ownership shares in the company. For example, for the year end of June 30th, 2018, Microsoft's net income was $16.571 billion. How long would it take me to count to 16.571 billion if I counted one number every second? Oh, not too long, just a little bit over 500 years. Yeah, that's a long time. That's a big number. 16.571 billion is a big number, and none of us really has a concrete understanding of how large the number is. It troubles accountants a little bit to be reporting a number that people can't even understand. So we report earnings per share. Think of a share of stock as evidence that I own a portion of a company. For Microsoft, there are 7.7 billion ownership shares of Microsoft out there. Some people own more than one share. Bill…

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