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EARNINGS PER SHARE

Description: This measure is the standard used to compare the financial results of publicly held companies. It is useful for shareholders to determine changes in earnings per share held over a period of time.

Formula: Subtract the dividends on preferred stock from net income, and divide the result by the combination of all outstanding common shares and all common stock equivalents. The amount of common stock equivalents is the total of all vested warrants and options as well as all convertible securities that have not yet been converted into common stock; this figure tends to be too high, since the holders of these common stock equivalents will frequently not exercise their rights to purchase common stock. If the terms for purchase of common stock equivalents are currently higher than the price at which they can be purchased on the open market, it is not very likely that they will be converted to common stock, and they can be safely excluded from the c....


  

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