ACCT3321 Lecture Notes - Lecture 9: Earnings Per Share, Performance Indicator, Share Repurchase
Document Summary
A ratio that is calculated by dividing the pro t or loss (earnings) attributable to ordinary shareholders of a parent entity by the weighted average number of ordinary shares the entity has on issue during the reporting period. Used as a key performance indicator when determining remuneration entitlements of directors and executives. Use by investors as a measure of an entity"s pro tability. Utility of eps has been criticised on basis of exibility that entities have in choosing accounting methods when determining their pro t. While accounting policy choice enables entities to select accounting methods more appropriate to re ect their actual businesss operations, it results inconsistencies between entities in the determination of their pro t. Limitation to the utility of the eps ratio for comparison purposes is that it can be altered simply by changes in the number of shares on issue.
