How to Calculate Earnings Per Share

Video Transcript

"Hello again I'm Spence and this is Jeannine, we're with Account Teams in Salt Lake City and we help people with their books and their taxes. I want to talk to you today about earnings per share. This is a little confusing when you get to stock work. If you take all of the profits of a company after their taxes and after all their obligations on what's left and you divide it by the total number of common shares then that would be the earnings per share.The little kicker in there is there's a thing called preferred stocks and those are people that get paid before the common stocks. The money that goes into preferred stock holders which is usually a set amount agreed upon has to be taken out of the net profits before you can calculate earnings per share.If there's a lot of profits left the common stock holders can earn more then the preferred stock holders if there is not so much there, the preferred stock holders are going to get theirs and nobody else gets anything."