Earnings per Share (EPS) = Net Income ÷ Weighted Average Number of Outstanding Shares
Example net income = $500,000
Example weighted average outstanding shares = 100,000
EPS = $500,000 ÷ 100,000
EPS = $5.00 per share
If preferred dividends exist, subtract them from net income first
Adjusted EPS = (Net Income – Preferred Dividends) ÷ Weighted Average Outstanding Shares
Example with preferred dividends = $50,000
Adjusted EPS = ($500,000 – $50,000) ÷ 100,000
Adjusted EPS = $4.50 per share