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WIKI ANALYSIS| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
Net Income Available for Common Shareholders equals net income minus preferred dividends paid
Net income (or net earnings, net loss, etc.) available to common shareholders represents the income available to holders of common stock. Net income available to common shareholders is important because it forms the numerator of the Earnings Per Share (EPS) calculation:
Earnings Per Share (EPS) = (Net Income - Preferred dividends) / Outstanding Shares
Net income available to common shareholders are the profits remaining after the company pays all of its suppliers, employees, service providers, creditors, and preferred shareholders. In other words, this is revenue less all expenses and preferred dividends. The number measures common shareholders' claim on the company's cash flows.
Examples
- Company XYZ has Earnings Per Share (EPS) of $1.50 and 100,000 Outstanding Shares. In this case, the company has $150,000 in net income available to common shareholders, or, the company's shareholders own $150,000 of the company's profits.
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