What does earnings per share (EPS) represent?

Earnings per share (EPS) is a financial metric that measures the amount of net income attributable to each outstanding share of a company's common stock. It provides investors with a clear indication of a company's profitability on a per-share basis, making it easier to compare earnings across different companies or track a company’s earnings growth over time.

By calculating EPS, analysts and investors can assess how much money the company makes for each share they own, which is critical for making investment decisions. For example, if a company has a high EPS, it often indicates that it is generating substantial profits relative to the number of shares available, which can signal financial health and attract potential investors.

The other options do not accurately define EPS. Total income earned by the company does not account for the number of shares outstanding. Net income minus total expenses does not provide a per-share metric, as it simply conveys the company's profitability after expenses without factoring in the number of shares. Finally, net income divided by total liabilities is not appropriate for EPS calculation since it doesn't relate income to shares in circulation, instead, this ratio is more aligned with assessing leverage. Thus, the correct understanding of EPS is focused specifically on net income per individual share of stock.