What is the significance of the weighted-average shares outstanding in EPS calculation?

The weighted-average shares outstanding is crucial in the calculation of earnings per share (EPS) because it offers a more accurate representation of a company's earnings attributed to each share of stock. This accuracy is achieved by taking into account shares that were issued or repurchased during the reporting period, reflecting the changes in the number of shares that have occurred.

Using a weighted average rather than a simple average compensates for the timing of share transactions, since shares may not have been outstanding for the entire period. This method ensures that the EPS calculation truly reflects the company's performance over the relevant time frame, enhancing the reliability of the earnings figure.

Accurate calculation is particularly important for investors and analysts who rely on EPS as a key indicator of a company's profitability and financial health. Therefore, the weighted-average shares outstanding directly influences investment decisions by presenting a clearer picture of earnings on a per-share basis.