Dear Chintan, Before you understand more of EPS, you need to know more on what is balance sheet and what is profit & loss statement. Why I say that is, the net profit is not part of balance sheet and it is part of profit & loss. To clarify few points, if a company earns Rs.1000 and there are 1000 share holders, it means the EPS is Rs.1. Suppose 600 shares are owned by promoter, 300 shares are owned by FII's, remaining 100 owned by you and me and, out of that you own 20 shares, it doesn't mean you will get Rs.20 credited to your account. The reason is the company has to renew its assets, which means, upgrade, replace, repair, expand etc. So the company which has a per share EPS of Rs. 1 will keep the 80 paise with it give the 20 paise as dividend to you. In this case, you will get Rs.4 credited to your account!!! Last but not least, a company has a EPS of Rs.10 while another has EPS of Rs.20, in no way you can judge the second company as a better company than first company. In actual fact the first company may be a better company based on so many other parameters. BTW, by answering your question, I don't become a senior member. I am just a member! Regards, On Aug 18, 2:01 pm, [EMAIL PROTECTED] wrote: > Dear All, > > I have some confusion regarding following. > > Generally company EPS is calculated as Net operation profit/No. of > outstanding shares. Few question to understand real EPS. > > A. Generally good companies equities to general public is only 10% , most > of equity is with institutional investors. MF, FII etc. and substantial > part is with promoters. > For example if company has outstanding share 1000 nos ( including general > public and institutions) and made profit of 1000 Rs. Its EPS would be "1 > rs". > > 1. What will promoters do in that case? they will not take any profit?? > 2. How they can take any profit, where it is shown in balance sheet? > > B. Generally companies want to plan IPO for expansion or start new > business which they are running from so many years. ( for example ABC > company want to expand its existing manufacturing facilities which is > existing from 20 years. ABC company is not listed on any of exchanges. > If say they will float IPO in sept 2008 to raise 10 million Rs by issue of > 100,000 (1 lacs) equity issues, and have total asset before issue of IPO > is 200 million. > If after one year this company made net profit of 1 million Rs, How the > EPS will be calculated > > EPS = 1,000,000 ( Net profit)/ 100,000 (outstanding share) = 10 rs > > In this case what happened to profit generated from its own assets which > was not part of shareholders equity?? Where the profit goes from it?? > Where it is shown on balance sheet. > > Appreciate if some senior members of the groups will clarify above > questions. > > Regards. > Chintan N. Patel > > ======================================================= > Confidentiality Notice > > This communication and the information it contains:- > (a) Is intended for the person(s) or organisation(s) named above and for no other person(s) or organisation(s). > (b) May be confidential, legally privileged and protected in law. Unauthorised use, copying or disclosure of any of it may be unlawful. If you have received this communication in error, please contact us immediately by email at [EMAIL PROTECTED] > =======================================================
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