I want to know more specific about comparing the basic earnings per share by yea

Question

I want to know more specific about comparing the basic earnings per share by year.

The question is How do the results for your company compare by year? Explain and give possible reasons for what you’ve found. (at least one paragraph).

My answer is In 2015, the net income in Amazon is 596 million dollars and basic weighted-average shares used in computation of earnings per share is 476 million dollars. Therefore, the basic earnings per share in 2015 is ­$1.28 (596/476). In 2014, the net loss in Amazon was (241) million dollars and basic weighted-average shares used in computation of earnings per share was 462 million dollars. Therefore, the basic earnings per share in 2014 was ($0.52) ((241)/462).

In this part, i want to know more specific that what the basic earnings per share really means in those two years of part in company. I NEED HELP WITH HOW TO MAKE CONCLUSION.

Explanation / Answer

As I understood, you need a conceptual understanding of BEPS instead of some theoritical paras. Following is the matter that I have drafted for you to give you conceptual understanding of topic. Hope this will help you.

Words about EPS

Definitaly, EPS is earning attributable to equity shareholders only allocated to each share individually. However EPS is a tool which measures speed of earning per share for investment in a company on ANNUAL BASIS.

Why is EPS calculated?

An Investor invest at a place where he get maximum return. But think, how an investor will came to know that how much return he will get on his investment. EPS helps an investor to gather information about how much a company is earning for their shareholders on each share he intends to acquire. Once investor acquire share then EPS help him to decide whether he need to continue his investment with current co. or he need to shift to another company whose EPS is higher.

Why EPS/BEPS is to be compared with previous years figures?

As I already mentioned that EPS is a tool to measure spped and performance. By comparing EPS year by year stakeholders as well as management can keep a close eye on performance of company. Also, preparing the balance sheet and income statements in a comparable format is a statutory requirement.

What Basic EPS really means?

EPS is of two types basic and diluted. Under Basic EPS, earning of the year is allocated to those shareholders only who holds shares in the company during that year. In other words, profit is apportioned to only those whose invest in the company to earn that profit. However under diluted, annual profit is also apportioned to those who are prospective shareholders.

How to make conclusion?

To make a conclusion, keep an investor's view. As in the given example, EPS rised to $1.28 positive in 2015 in comparision to $0.52 negative in 2014 implies a very good performance of company in 2015 in comparision to 2014. It also implies that company is a growth company.

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