Where Is Earnings Per Share Disclosed in the Financial Statements?

Earnings Per Share (EPS) represents a company’s profit allocated to each outstanding share of its common stock. It is a metric used by investors and analysts to gauge a company’s profitability on a per-share basis. This provides a standardized measure that can be compared over time or against other companies in the same industry.

The Primary Location on the Income Statement

The primary location for Earnings Per Share is on the income statement. Under U.S. Generally Accepted Accounting Principles (GAAP), Accounting Standards Codification (ASC) Topic 260 requires public companies to present EPS figures directly on this statement. You will find these figures at the bottom of the income statement, immediately after the net income or net loss for the period.

This placement ensures that anyone reviewing the company’s operating results can immediately see the impact on a per-share basis. Both basic and diluted EPS must be shown with equal prominence for each period presented. If the company reports a discontinued operation, it must also present EPS for income from continuing operations separately from the net income EPS.

Interpreting Basic and Diluted EPS

When you locate EPS on the income statement, you will see two distinct figures: basic and diluted. Basic EPS is calculated by taking the net income available to common stockholders and dividing it by the weighted-average number of common shares outstanding during a period. This calculation provides a straightforward look at profitability based on the actual shares currently in the market.

Diluted EPS offers a more conservative view of the company’s profitability. It adjusts the basic EPS calculation to show the potential impact if all dilutive securities were exercised. These securities include instruments like stock options, warrants, and convertible bonds, which could be converted into common stock and thus increase the total number of outstanding shares. By showing this “worst-case” scenario, diluted EPS provides insight into how much earnings could decrease if all potential shares were issued.

Finding the EPS Calculation in the Notes

While the final EPS numbers are on the income statement, the detailed mechanics of their calculation are in the notes to the financial statements. Investors should look for a specific footnote, often titled “Earnings Per Share” or a similar name, to find this detailed breakdown.

This note provides a reconciliation for both the numerator and the denominator used in the basic and diluted EPS calculations. For the numerator, it will show the adjustments made to net income, such as subtracting preferred dividends, to arrive at income available to common stockholders. For the denominator, it details the weighted-average share calculation and shows the specific number of potentially dilutive shares that were added for the diluted EPS figure.