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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Expert led content

+1,000 expert presented, on-demand video modules

Learning analytics

Keep track of learning progress with our comprehensive data

Interactive learning

Engage with our video hotspots and knowledge check-ins

Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

Connect Finance Unlocked to your current platform

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More featured content

Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Earnings Per Share

Earnings Per Share

Saket Modi

20 years: Chartered accountant & educator

The earnings per share or EPS is a measure of the company’s financial performance during the period. Saket further explains the Price to Earnings ratio, and how both of them are calculated.

The earnings per share or EPS is a measure of the company’s financial performance during the period. Saket further explains the Price to Earnings ratio, and how both of them are calculated.

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Earnings Per Share

4 mins 58 secs

Key learning objectives:

  • Understand how the basic EPS is calculated

  • Understand how the diluted EPS is calculated

  • Outline the importance of Price to Earnings (P/E) ratio

Overview:

The earnings per share or EPS is a measure of the company’s financial performance during the period. It shows how much the investors have earned per ordinary share. There are two variations of EPS, basic and diluted.

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Summary

How is the basic EPS calculated?

The basic EPS is equal to the net income available to the ordinary shareholders divided by the weighted average number of ordinary shares outstanding.

Basic EPS = Net income available to the ordinary shareholders / Weighted average number of ordinary shares

The basic EPS can be compared with either the previous periods to understand the trend in EPS growth, or it can be compared with other companies.

How is the diluted EPS calculated?

The diluted EPS takes account of all share options and convertible securities and treats them as if they are converted into ordinary shares; that is, it affects the denominator in the basic EPS calculation. The numerator, which is the net income available to the ordinary shareholders, may or may not be affected. Typically, if a company has convertible securities, the diluted EPS is lower than the basic EPS.

How do we calculate the P/E ratio?

The EPS is the denominator in the commonly used Price to Earnings or P/E ratio in valuation.

P/E ratio = Market price per share / EPS

What is the importance of Price to Earnings (P/E) ratio?

Investors and analysts compare the P/E ratio of one company to the P/E ratio of another company in the same industry, or to the industry average to determine if the shares appear to be undervalued, overvalued or fairly valued compared to its earnings. The companies that grow faster than average, for example, some of the technology companies, also have a high P/E ratio. This shows that investors are willing to pay more now due to the growth expectations in the future.

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Saket Modi

Saket Modi

Saket is a financial trainer and consultant based out of London. He specialises in advanced accounting, financial reporting and financial analysis, particularly with regards to International Financial Reporting Standards (IFRS), International Public Sector Accounting Standards (IPSAS) and Financial instruments.

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