What does earnings per share (EPS) indicate?

Earnings per share (EPS) is a financial metric that provides insight into the profitability of a company on a per-share basis. It is calculated by taking the net income of the company, subtracting any preferred dividends, and then dividing that figure by the weighted average number of shares outstanding during a specific period.

This measure is particularly useful for investors because it gives them an idea of how much profit a company generates for each share of common stock, making it easier to compare profitability across companies within the same industry or relative to its own historical performance. A higher EPS usually signals a more profitable company, which can influence investment decisions.

While the other options touch on various aspects of a company's financial health or operations, they do not accurately capture the specific purpose of EPS. Therefore, the focus of EPS as an indicator of profit attributable to each share makes it a critical figure for assessing a company’s performance and overall value to shareholders.