In this video, we covered earnings per shares (EPS) in a CPA exam simulation.
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Earnings Per Share (EPS) and the weighted average number of shares are closely related concepts in financial accounting, particularly in the context of reporting a company's profitability and evaluating its performance from the perspective of its shareholders.

Earnings Per Share (EPS)
Earnings Per Share (EPS) is a key financial metric that measures the portion of a company's profit allocated to each outstanding share of common stock. It is a common indicator used by investors to gauge a company's profitability on a per-share basis, making it easier to compare the profitability of different companies. The formula for calculating EPS is:

EPS=Net Income−Dividends on Preferred Stock Weighted Average Number of Shares Outstanding
EPS= Weighted Average Number of Shares Outstanding
Net Income−Dividends on Preferred Stock
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Weighted Average Number of Shares
The weighted average number of shares outstanding during a period takes into account any changes in the number of shares over that time. It's not simply the beginning plus ending shares divided by two; it accounts for the timing of share issuance or buybacks. This provides a more accurate measure of the shares available throughout the period for the purpose of calculating EPS.

The calculation involves weighting the shares by the portion of the period they were outstanding. For instance, if a company issued additional shares halfway through the fiscal year, those new shares would only count as half for that year in the weighted average calculation.

Importance in Financial Analysis
EPS: Higher EPS values are generally perceived as positive, indicating that the company is more profitable and has more earnings to distribute to its shareholders. However, it's crucial to look at EPS in conjunction with other financial metrics to get a comprehensive view of a company's financial health.

Weighted Average Shares: Understanding how the number of shares changes over time is essential for investors, as issuing new shares (dilution) can decrease EPS and existing shareholders' ownership percentage, while share buybacks can increase EPS and the ownership percentage of remaining shareholders.

In summary, EPS provides a direct measure of profitability per share, while the weighted average number of shares is a crucial factor in its calculation, ensuring that EPS reflects the actual earnings available to each share over the period in questio


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