A Study on Determinants of Earnings per Share Using Dupont and Lerner Model

Abstract

]Earnings per share (EPS) is the net income or income available to equity shareholders divided by number of equity shares in the company. ft is an important barometer for change in stock prices of the companies. The value of the firm is EPS multiplied by Price Earnings multiples of that company. Different companies have different EPS and same company has different EPS f or different years. EPS, being an important variable having impact on share price, it is necessary to know the factors which are having impact on EPS of companies. As per Dupont analysis, Return on Equity depends on operating efficiency (profit margin), asset use efficiency (asset turno ver) and financial leverage of the firm. The paper attempted to determine as to what extent these factors are having impact on EPS. Lerner model has been used to find out the determinants of EPS. For the purpose of study top ten IT (Information Technology) companies are taken and period of study is between 2005 and 2009. The important findings from the study are that the profilability and return on assets have impact on EPS whereas asset use efficiency does not have a significant influence on EPS.