How to Calculate Basic Earnings Per Share (EPS)

Earnings per share (EPS) is considered to be one of the best measures to summarize the performance of a company. The EPS for a company is reported only for common stock.

A company can have simple capital structure or complex capital structure.

• A company with a simple capital structure can only have common stock, nonconvertible debt and non-convertible preferred stock. It cannot have any potentially dilutive securities (i.e., stock options, warrants, convertible  bonds, and convertible preferred stock). For companies with simple capital structure, we calculate the Basic EPS.
• A company with a complex capital structure also includes convertible securities, stock options and warrants. For these companies, we calculate both Basic EPS and Diluted EPS. The diluted ESP considers the impact of potentially dilutive securities.