What is the difference between earnings per share (EPS), funds from operation (FFO), and dividends per...

What is the difference between earnings per share (EPS), funds from operation (FFO), and dividends per share?

Expert Solution

Earning per share - It is the earning attributable to equity shareholders per share. While calculating EPS we take into effect operational income and non operational income as well as operational and non operational expenses.It is used in all industries for analysis.

EPS = Net Profit / No. of Shares

Funds from operation - It can be defined as cash flow generated from operations. To calculate FFO we need to divide cash flow from operations by Number of Shares. It would exclude non operational income and expense such as interest income and interest expenses, gain/loss on sale of Assets. Also it would exclude depreciation and amortization expenses.It is generally used in Real Estate Investment Trusts.

FFO= (Net Profit+ operational expense - operational income +depreciation & amortization)/No. of Shares

Dividend Per Share- It can be referred to as earning distributed to equity shareholders per share. It is part of EPS which is distributed to equity shareholders. It can be also calculated by multiplying dividend payout ratio which is percentage of dividend to be distributed from earning available to Equity shareholders.

DPS = (Net Profit/ No. Of Shares)* Dividend Payout Ratio

DPS= EPS* Dividend Payout Ratio

jeff jeffy answered 6 months ago

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