7/24/2019 Unit 10- Accounting for Earnings

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ACCOUNTING FOREARNINGS

AND

BOOK VALUE PER SHARE

UNIT 10 (ACCTBA2 WORKBOOK)

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EARNINGS PER SHARE

(EPS)

EPS is the amount of eanin!s atti"uta"#e to ea$ho%ina& shae' It is the in$ome %uin! thea$$ountin! &ea assi!ne% to ea$h outstan%in!

o%ina& shae of a $ooation' It etains moe too%ina& shaes "e$ause efeen$e shaes ean a

*e% ate of etun on thei a +a#ue' The fomu#ause% to $omute "asi$ eanin!s e shae is,

EPS - Net in$ome ' A+ea!e outstan%in!

o%ina& shaes

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BOOK .A/UE

When the tota# #ia"i#ities ae %e%u$te%

fom the tota# assets of the "usiness theesu#t ou#% "e $a##e% net assets3 netoth3 o net "oo4 +a#ue3' 5en$e thefomu#a to $omute "oo4 +a#ue ou#% "e,

BOOK .A/UE - TOTA/ ASSETS 6 TOTA//IABI/ITIES

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BOOK VALUE PER SHARE

The "oo4 +a#ue e shae is the otion of the tota#sto$4ho#%es7 e8uit& assi!ne% to ea$h o%ina& outstan%in!shae'

9o in+estment uoses the "oo4 +a#ue e shae is usefu#in e#ation to ma4et +a#ue e shae to e+a#uate theatta$ti+eness of the e8uit& shaes' It is $omute% asfo##os,

BOOK .A/UE PER S5ARE - Tota# shaeho#%es7 e8uit& (S5E)

Num"e of o%ina& shaes

outstan%in!