earnings per share

earnings per share
EPS *Net income accruing to a corporation’s stockholders, expressed in terms of individual shares of ownership. The earnings per share (EPS) is calculated by dividing net income by *common stock. In practice, this basic calculation can require adjustments to the net income figure for the *dividends of *preferred stock, which have preference over *common stock in the distribution of *earnings. The basic calculation may also require adjustments to the common stock figure, to take account of the potential dilution of stockholdings from *convertible securities and *stock options. The EPS is a highly sensitive figure for corporations, and investment analysts place great emphasis on the evolution of EPS over time. Pressures to meet market expectations of EPS were a prominent factor in the earnings manipulation scandals at *Enron and *WorldCom: One commentator mused that the acronym stood for the "eventual prison sentence" of individuals tempted to manipulate EPS (quoted in Jeter, 2003, 179).

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