Which formula calculates the number of earnings per share?

The formula that accurately calculates earnings per share (EPS) is derived by dividing net income by the average number of common shares outstanding. This approach effectively shows the portion of a company’s profit allocated to each share of common stock, allowing investors to understand the profitability of the company on a per-share basis.

EPS is a crucial metric for investors as it indicates how well a company is performing financially relative to its shares. A higher EPS suggests greater profitability and can lead to higher stock valuations, attracting interest from potential investors.

The other formulas do not provide a valid calculation for earnings per share, as they involve measures that do not pertain specifically to common shares or profitability per share basis.