# Profitability Ratios from the Owner's Point of View
These ratios analyse profitability on a per-share basis, as seen by ordinary (equity) shareholders.
## A. Earnings per Share (EPS)
Measures the profit attributable to each equity share — the most-watched indicator of profitability for ordinary shareholders.
$$\text{EPS} = \frac{\text{Net Profit available to equity shareholders}}{\text{Number of equity shares outstanding}}$$
Net profit available to equity shareholders = PAT − Preference dividend.
## B. Dividend per Share (DPS)
EPS shows total profitability per share but not how much is actually paid out. DPS indicates the profit distributed to equity shareholders per share.
$$\text{DPS} = \frac{\text{Total Dividend paid to equity shareholders}}{\text{Number of equity shares outstanding}}$$
## C. Dividend Pay-out Ratio (DP)
Measures the proportion of earnings paid out as dividend — and, by implication, how much has been retained by management for reinvestment.
$$\text{Dividend Pay-out Ratio} = \frac{\text{DPS}}{\text{EPS}}$$
## How they connect
- EPS = total earnings per share
- DPS = the part of EPS handed back to shareholders
- Payout ratio = DPS ÷ EPS (the fraction distributed)
- Retention ratio = 1 − Payout ratio (the fraction ploughed back)
A low payout/high retention is typical of growth firms reinvesting in expansion.