If an explanation is required with an example;
Let's assume that a business made a net profit of $ 4,000.00 at the end of the year and decided to distribute $ 1,000,000 by the board decision.
The number of shares is determined by the paid capital of the enterprise. For example, for this example, we have $ 1,500,000 paid capital. In this case, we can take the number of shares as 1.500.000.
According to the earnings per share calculation formula;
(4.000.000 - 1.000.000) / 1.500.000 = $ 2.
• The important point here is that if the paid capital of the enterprise was $ 1,000,000 in the first 6 months of the year, $ 1,500,000 in the second six months, we would find the average with the weighted average and calculate it according to 1,250,000 shares.
• Another important point is that if the enterprise had a paid capital of $ 1,000,000, but if the part of the stock market was 40% of the company, we would calculate 500,000 shares.