# You are a consultant working with various companies that are considering incorporating and listing shares on a stock exchange. One of your clients asks you about the various acronyms she has been hearing in conjunction with financial analysis. Explain the following acronyms and how they measure different things but may complement each other: EPS (earnings per share), EBITDA (earnings before interest, taxes, depreciation, and amortization), and NOPAT (net operating profit after taxes).

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 14, Problem 13PB
Textbook Problem
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## You are a consultant working with various companies that are considering incorporating and listing shares on a stock exchange. One of your clients asks you about the various acronyms she has been hearing in conjunction with financial analysis. Explain the following acronyms and how they measure different things but may complement each other: EPS (earnings per share), EBITDA (earnings before interest, taxes, depreciation, and amortization), and NOPAT (net operating profit after taxes).

To determine

Introduction:

Shares are the financial instruments used to raise funds from the investors by the corporate entity. It represents the fraction of ownership in a corporate entity. It is the smallest part of the company’s capital.

To explain:

Various acronym given, and also state there purposes.

### Explanation of Solution

EPS (Earning per Share): EPS refers to the profits earned by an entity for every share which is outstanding. Market price for a class of stock may increase if EPS is increasing, and it may reduce if EPS is declining.

EPS is calculated by using given formula:

Earning Per Share=Net IncomePreference DividendWeighted Average Common Shares Outstanding

EPS is one of the method to measure an entity’s profit.

EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization): EBITDA is one of the indicator of an entity’s operating performance. It helps to examine an entities performance without consideing financing, accounting and tax implications

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