What is the general formula used to calculate Earnings per Share (EPS)?

The formula for calculating Earnings per Share (EPS) is derived from a company's net income, which represents its profit after all expenses have been deducted. To determine EPS, you take the net income and subtract any preferred dividends that need to be paid. This gives you the profit available to common shareholders. Then, you divide this figure by the number of shares outstanding, which represents the total number of shares of common stock currently held by shareholders.

This approach effectively reflects the earnings attributable to each share of common stock, providing a clear view of a company's profitability on a per-share basis, allowing investors to gauge financial health and make comparisons across companies and industries.

In contrast, the other options do not accurately represent the standard calculation for EPS. For instance, adding dividends to net income or including them in the denominator would not provide a true representation of earnings attributable to common shareholders. Calculating EPS using revenue or combining it with dividends without the proper adjustments does not reflect the financial reality of shareholder earnings either.