Earnings Per Share Video Lecture | Advanced Accounting for CA Intermediate

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FAQs on Earnings Per Share Video Lecture - Advanced Accounting for CA Intermediate

1. What is Earnings Per Share (EPS) and why is it important for investors?
Ans. Earnings Per Share (EPS) is a financial metric that indicates the portion of a company's profit allocated to each outstanding share of common stock. It is important for investors as it helps them assess a company's profitability and potential for growth.
2. How is Earnings Per Share (EPS) calculated and what factors can impact it?
Ans. EPS is calculated by dividing a company's net income by the total number of outstanding shares. Factors that can impact EPS include changes in net income, the number of outstanding shares, and any dilution from convertible securities.
3. What is the difference between basic EPS and diluted EPS?
Ans. Basic EPS only considers the number of outstanding shares, while diluted EPS takes into account potential dilution from convertible securities such as stock options or convertible bonds. Diluted EPS is usually lower than basic EPS.
4. How can investors use Earnings Per Share (EPS) to compare different companies?
Ans. Investors can use EPS to compare the profitability of different companies within the same industry. A higher EPS generally indicates higher profitability, but it's important to consider other factors like growth prospects and industry trends.
5. What are some limitations of using Earnings Per Share (EPS) as a financial metric?
Ans. EPS does not consider the quality of earnings, potential accounting manipulations, or the company's capital structure. It should be used in conjunction with other financial metrics for a more comprehensive analysis.
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