# Earnings Per Share Calculations

Updated: Aug 10, 2021

### How to calculate basic earnings per share

In order to calculate basic earnings per common share divide weighted average shares outstanding by net income available to common shareholders

Basic EPS = Net Income Available To Common Shareholders / Weighted Average # Of Share Outstanding

Calculating weighted average number of shares outstanding:

Example:

Beginning of the year | 100 shares outstanding

March 31 | Issued 20 shares

June 30 | Repurchased 35 shares

Net Income = \$85

Dividends Paid = \$25

Preferred Dividends = \$35

What is the weighted average number of shares outstanding for the year?

First, determine the time length of each period. Every time the share count changes a new time period begins. In this case, the business has 100 shares outstanding for 3 months. The weight of that share number is therefore 3/12 which is .25. The weight is then multiplied by the number of shares outstanding in that period. Once this is done for all time periods the total is summed. The result is the weighted average common shares outstanding.

What is the net income available to common shareholders?

Net income available to common shareholders = Net income - Preferred Dividends

Note* Do not deduct dividends paid to common shareholders

Net income available to common shareholders = \$85 - \$35 = \$50

Solution

Basic EPS = \$50 / 97.5

Basic EPS =\$.51

## How to calculate diluted earnings per share

In order to calculate diluted earnings per share you should first familiarize yourself with the general method of calculating diluted shares outstanding here. After determining the diluted number of shares outstanding at each time period you may calculate the weighted average number of diluted shares outstanding in the same way as above.