Per share: Overview, definition, and example
What is "per share"?
"Per share" is a term used to express the value, price, or financial result of a security (usually a stock or equity) on an individual share basis. It is commonly used in financial contexts to describe earnings, dividends, price, or other financial metrics on a per-share basis, giving investors insight into the performance or value of a single share of stock. This metric allows for easy comparison across different companies or periods, as it standardizes financial data by breaking it down to the level of a single share.
Why is "per share" important?
The "per share" concept is important because it provides investors with a clear understanding of how a company is performing on an individual share basis, which is crucial when assessing the value or return on their investment. It is used to determine key financial indicators such as earnings per share (EPS), price per share (market price), and dividend per share (DPS). By expressing these metrics on a per-share basis, investors can compare them against competitors, track the company’s financial performance over time, and assess the attractiveness of a particular investment relative to others.
Understanding "per share" through an example
For example, a company announces that it has earned $1 million in net income for the year and has 1 million outstanding shares. The earnings per share (EPS) would be $1 per share, calculated by dividing the total earnings by the number of shares. This means that for each share an investor holds, the company earned $1 during that year.
In another example, a company declares a dividend of $0.50 per share. If an investor owns 100 shares, they will receive a total dividend payment of $50 (100 shares × $0.50 per share). The "per share" metric makes it easy for shareholders to understand how much they will earn or receive based on their individual investment.
An example of "per share" in a contract or report
Here’s how "per share" might appear in a financial statement or contract:
“The Company will pay a dividend of $0.50 per share to all shareholders of record as of the dividend record date. The dividend will be distributed within 30 days of the record date to those who hold shares of the Company at the close of business on that date.”
Conclusion
"Per share" is a fundamental concept in finance that helps break down a company’s financial performance, dividends, and stock value into easily understandable and comparable metrics. It is widely used by investors to evaluate investments and make informed decisions. By using "per share" as a unit of measurement, investors gain clarity on how a company’s financials relate to the individual value of their investment.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.