What formula is used to calculate Earnings Per Share (EPS)?

The formula for calculating Earnings Per Share (EPS) is derived from the financial performance of a company and focuses on how much profit is attributable to each share of common stock. By dividing net income by the number of shares outstanding, this formula provides a clear indication of a company's profitability on a per-share basis. This is particularly useful for investors as it allows them to compare the earnings generated by different companies on a standardized basis.

Using net income in the numerator reflects the company’s total earnings after all expenses, taxes, and costs have been deducted. The denominator, which is the number of shares outstanding, represents the total number of shares issued by the company that are currently held by shareholders. Together, this results in EPS, a key metric that helps investors assess financial performance and make informed investment decisions. In contrast, the other options provided do not accurately represent the formula for EPS, as they involve different variables that do not directly relate to calculating earnings on a per-share basis.