Wall Street Redbook Practice Test 2025 – Comprehensive Exam Prep

Question: 1 / 455

What does Basic EPS measure?

Profitability per employee

Earnings per share based on basic shares outstanding

Basic EPS, or Basic Earnings Per Share, measures the profitability of a company on a per-share basis, calculated using the company's net income available to common shareholders divided by the weighted average number of shares outstanding during a specific period. This metric provides investors with insight into how much earning power a company generates for each share of its stock, making it a crucial indicator of a company's profitability.

Using Basic EPS allows for a straightforward comparison of profitability across different companies and time periods by standardizing earnings relative to share count. This measure does not take into account any potentially dilutive securities like stock options or convertible bonds, which is why it is termed "basic."

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Total company profits

Market share of a company

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