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How to Calculate Earnings Per Share of Common Stock on an Income Statement

Original post by Mark Kennan of Demand Media

One of the financial disclosures publicly held company have to release is an income statement. The income statement details the various revenues and expenses that a company has for the year, which allows investors to calculate various financial ratios. The earnings per share of common stock measures the company's profits after paying preferred stock dividends, which shows how much the company could distribute per each share in a dividend, if it so desired.

Contents

Step 1

Look up the company's net income on its income statement. If for some reason the company's income statement does not show the net income, subtract the company's expenses from the company's total revenues to find the company's net income.

Step 2

Subtract the preferred share dividends paid from the company's net income. For example, if the company has $19 million in net income but pays $3.4 million in preferred stock dividends, that leaves $15.6 million in earnings available to common stockholders.

Step 3

Divide the company's earnings per share of common stock by the number of common shares outstanding to find the earnings per share of common stock. Finishing this example, if the company has 1.3 million common shares outstanding, divide $15.6 million by 1.3 million to find the company has $12 in earnings per common share.


                   

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About the Author

Mark Kennan is a freelance writer specializing in finance-related articles. He has worked as a sports editor for "Ring-Tum Phi" and published articles on a number of online outlets. Kennan holds a Bachelor of Arts in history and politics from Washington and Lee University.


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