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Earning Per Share Ratio

This ratio measures the profit available to the equity share holder on a per share basis, that is, the amount of profit they can get on every share held. It is calculated bylining the profits available to equity shareholders by the number of the outstanding shares. The formula is:

Earning Per Share = Net Profit Available to Equity Shareholders / Number of Equity Shares Outstanding

Net profits are calculated after deducting tax and dividends on preference shares.

The object of calculating this ratio is to measure the profitability of the firm from the point of view fo the owners.

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