Example of Basic Earnings per Share

Example of Basic Earnings per Share

The basic earnings per share is calculated by dividing the profit attributable to the ordinary shareholder by the weighted number of shares.

Example # 1

 For example ABC Company has ordinary profit for the year $ 800,000 and outstanding shares for the year were 500,000.

Solution

Profit for the year	$ 800,000
Average outstanding Shares	$ 500,000
Earnings per share	$ 800,000/500,00 = 1.6 $

Example # 2

Ordinary profit for 2014	$ 1,200,000
Issued share 01. Jan,2014	600,000 Share
Issued 30 June,2014	400,000 Shares
Calculate the Earning per share

Solution

1. Calculate Average Weighted Shares

from	To	Outstanding period	Factor	Shares outstanding	Weighted Average Shares
1 Jan,2014	30, Jun,2014	6 month	6/12	600,000	300,000
30 june,2014	31 Dec,2014	6 Months	6/12	1,000,000	500,000
					800,000

2. Calculate Earnings per Share

Ordinary Profit	$ 1,200,000
Weighted average outstanding Shares	800,000
Basic Earnings Per Share	$ 1,200,000/800,000 = $ 1.5