FAR EPS · Updated November 2026
Basic EPS: What Goes in the Numerator and Denominator?
Basic EPS becomes manageable when you separate the income numerator from the share-count denominator.
Numerator
Start with net income and adjust for applicable preferred dividends to determine income available to common shareholders.
Denominator
Use weighted-average common shares outstanding during the period rather than simply ending shares.
Treasury stock
Treasury shares are not outstanding and therefore reduce the share count for the period they are held.
Stock splits and dividends
Stock splits and stock dividends generally require retroactive treatment in the share count for comparative EPS purposes.
The takeaway
Numerator focuses on income available to common shareholders. Denominator focuses on weighted-average common shares outstanding.
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FAQ
Do ending shares automatically equal the EPS denominator?
No.
Do treasury shares count as outstanding?
No.
Can preferred dividends reduce the basic EPS numerator?
Yes when applicable.