 In this presentation, we will take a look at the calculation for earnings per share. The earnings per share calculation is useful for people that are analyzing the stocks. And it's very common calculation. So we want to take a look at the earnings per share. We want to say what it does and what it does not do. First of all, the earnings per share can give some kind of implications that aren't exactly true when we think about the earnings per share, meaning the earnings per share by its name would often give us the impression that those earnings would then be distributed to the shareholders, which is not necessarily the case. So earnings per share is going to be useful for analyzing the stock, but isn't exactly what is going to be distributed, almost never will be what is distributed, and can lead to untrue expectations about what the dividends may be. So in order to think about this further, let's just take a look at the calculation, what the calculation will be. We'll start with net income, and then we're going to divide net income by the weighted average common shares outstanding. Now what this means is what we're just doing is we're taking the net income, which is of course the performance of the company, how the company did over the time period, whether that be a month or a year, and we're dividing it. You could think of just basically the shares outstanding. Why do we have the weighted average? Because we're trying to find out how many shares are outstanding kind of average through the time period, and if there were no new shares outstanding or no new shares issued, then it would be the same. In other words, we would calculate this as taking the average or the shares at the beginning of the time period, whether it be year or month, and then the shares at the end of the time period, year or month, adding them together, dividing by two. And what we're trying to do then is find, okay, what's the average amount of shares that are outstanding at any given time? The only reason that would change is if the company issued more shares, something that doesn't happen all the time. We might not think that because shares are being traded all the time on like a stock exchange, but those shares aren't being issued from the corporations. Typically, most of those shares being traded by far are just being traded amongst individuals not being part of shares that are being issued from the company. So in other words, when we think about the shares being issued from the company, it's kind of like we are having an initial, an offering of the shares and that's like the owners investing into the company. We expect that to happen at the beginning of the company and periodically as we have the need for capital throughout the life of the company, but we hope that normally what's going to happen is we're going to have generate revenue, generate money into the company, and then the money should be going the other way in the form of dividends out to the shareholders. So you could think of this basically as net income divided by the shares outstanding for the most part. And then what that means is that we're just basically taking if we had each number of shares outstanding, you could think of it as net income. If we had the cash, if we had just the pile of money, the net income, what we've earned throughout the time period, and the number of shares divided by that, you would think, okay, that just means the amount of money then that the company has earned, they can then be allocated to each share. And so then if we then owned the shares, if we owned one share, you would think that that would be the amount of net income allocated to our one share. If we own two shares, then we'd get twice that amount, each share being proportional. And that's why it all works out nicely as we are a corporation. What this can lead us to think however, is that the net income is owed to the owners in a sense, we are the owners. So you might think, we might think, well, if we have net income, we should be distributing that net income in accordance with however many shares are out there, which could happen. A company might say, hey, we earned this much money, we're going to distribute that money to the shareholders. But that decision isn't necessarily the stockholders or not directly. The stockholders vote for the board of directors, which would then decide how much dividends to give. So the dividends could be whatever the company decides to give in terms of dividends. But this is a useful calculation for us to think about, okay, what was really kind of generated in value. You would think that the value of the stock would go up from a market standpoint in terms of the cost of the stock in some relationship to the earnings per share. That might be some kind of logical relationship or correlation between those. Doesn't necessarily correlate to the dividends that would be given. Why might it and why might it not? Some companies, if they're really established companies and they've been doing very well and they don't need to invest in more capital because they already have all the capital, the infrastructure they need to generate revenue, the business model is set up, and they know how to just make money with it. Then they don't need more capital investment to generate more earning potential. Then they may give a lot of the dividend back because that might be their business model. They're established companies, they're just making money doing what they do. They're already in place and they have a policy of giving dividends based on their earnings. But that's going to be a policy standpoint. A company may be a growing company or have ideas on growing in the future, which would probably include capital investments, investing in more machinery, investing in more individuals and buildings or something like that with the goal of income generation in the future. In that case, even if we had income and we could distribute it, but we may not, the company may decide we're going to hold on to that income and we're going to invest it. Why would that be okay to us, the shareholders? Why wouldn't we just sell the shares and say, you know, you're hoarding the income, I want the money back? Because we're hoping in that case, if we're that type of shareholder, we're not really looking for income through dividends. If we're holding a stock that plans in that format, we're looking for the value of the stock to go up. If they do that, then we would think there's going to be future value going up in the corporation. That will increase the value of the stock price now. And hopefully that would be the idea and possibly lead to income in the future, either through dividends that would then be distributed to us or through the sale of a stock which would increase in value. So this again, very common type of ratio for us to kind of analyze the stock. It gets a little bit more into the type of analysis we would do if we were valuing the stock rather than the type of analysis we will do all the time in terms of creating the financial statements. However, once we start to look at the financial statements, we want to start introducing these ratios because they can help us in the creation of the financial statements because they can point out where there's going to be problems and see and point out areas where there may be errors. So as we start putting the financial statements together, looking at some of these ratios will be very useful for decision making, for putting the financial statements together, for detecting if there's errors, for looking at audits. They're also very useful for my financial statement standpoint, from a financial analysis standpoint, from an investor standpoint for example, trying to determine the health of the business.