ACCOUNTING FOR

EARNINGS
AND
BOOK VALUE PER SHARE
UNIT 10 (ACCTBA2 WORKBOOK)

EARNINGS PER SHARE

(EPS)

EPS is the amount of earnings attributable to each

ordinary share. It is the income during the
accounting year assigned to each outstanding
ordinary share of a corporation. It pertains more to
ordinary shares because preference shares earn a
fixed rate of return on their par value . The formula

used to compute basic earnings per share is:

EPS =
Net income
.

Average outstanding

ordinary shares

BOOK VALUE
When

the total liabilities are deducted

from the total assets of the business, the
result would be called net assets, net
worth or net book value. Hence the
formula to compute book value would be:

BOOK

VALUE = TOTAL ASSETS TOTAL

LIABILITIES

BOOK VALUE PER SHARE

The book value per share is the portion of the total

stockholders equity assigned to each ordinary outstanding
share.

For investment purposes, the book value per share is useful

in relation to market value per share to evaluate the
attractiveness of the equity shares. It is computed as
follows:

BOOK VALUE PER SHARE = Total shareholders equity (SHE)

Number of ordinary shares
outstanding