From the course: Finance and Accounting Tips

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Earnings per share

Earnings per share

From the course: Finance and Accounting Tips

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Earnings per share

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- On every income statement of a publicly traded company, you will see at the bottom the term earnings per share. Now, what does that number mean? - [Kay] Well, it means exactly what it says. It's the earnings per share. It's the earnings associated with an individual share of stock. Suppose a company reports earnings, or net income of one million dollars, and the company has a million shares of stock outstanding. - [Jim] Then the earnings per share of stock is $1.00 per share. That's the amount of a company's net income for the current period that is associated with each individual share of stock. - That means if I own a hundred shares of that company stock, then my share of that year's net income is $100. Now, that doesn't mean I'm going to receive a check for $100, it means that my claim on the company's income is that amount, $100. - Then, the corporation's board of directors, who are elected to represent the shareholders, they determine what to do with those earnings. Should we…

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