At the most basic level, EPS is a company's earnings during a particular period, divided among the company's shares outstanding. It is expressed as a dollar figure and can be positive or negative.

Professional stock analysts spend a lot of time attempting to estimate future EPS based on a variety of sources. If a company exceeds analysts' estimates, its stock is likely to rise in the short term, just as it is most likely to fall if actual EPS is below these estimated figures.

For the growth stock investor, EPS is an important figure. It pays to be aware of exactly what EPS means and how analysts and individual investors figure out their estimates of future earnings.

Defining EPS

As indicated, EPS is a company's earnings or net income divided by its shares outstanding.

Net income is the amount of profit earned by a company after it pays taxes and regular operating expenses. Shares outstanding are the average number of shares outstanding issued by a company during a particular period.

Here's an example.

XYZ Company has quarterly earnings or net income of $4 million with 13.2 million shares outstanding. Dividing the earnings by the shares outstanding works out like this:

$4 million ÷ 13.2 million = .3003

Rounding the EPS figure, as is commonly done, gives us a figure of 30 cents a share.

U.S.-based publicly held companies are required to file financial statements four times a year with the Securities and Exchange Commission (SEC), Washington, D.C., which is why you hear about "quarterly" earnings in the financial press.

The most common reporting schedule is at the end of March, June, September, and December, but companies can report on a different schedule as long as the reporting periods are even and regular. Companies are also required to report yearly financial statements at the end of their fiscal year, which is why you hear about "yearly" earnings per share.

Varieties of earnings

As straightforward as the calculation seems, there are types of EPS, and those varieties can complicate your assessment of a company's prospects. This complexity is found in both the variables that make up the EPS equation.

First, let's talk about the top figure in the EPS equation—earnings. As we've mentioned, earnings are based on net income from a particular period.

That period can be quarterly, yearly, or even six months (two quarters). It can be from the past, or projected—or estimated—from the future.

EPS can also vary based on the particular accounting policies or financial assumptions of the reporting company. Although a company has to comply with certain assumptions in reporting its EPS to the SEC, it can issue other EPS figures that make it look better to the public through press releases and earnings announcements.

A company must report EPS based on generally accepted accounting principles (GAAP) in its SEC filings. This is a generally conservative number accepted by the government and accounting professionals.

Outside of GAAP earnings, a company can report its earnings in a number of other ways. It could exclude one-time events that aren't likely to happen again or include revenues that aren't included in GAAP earnings.

And these are just some of the ways that the earnings part of the equation can vary. It gets even more interesting once you factor in all the ways shares outstanding can be calculated.

Shares outstanding

Like earnings, shares outstanding is a fluid figure that can be calculated in several ways. Generally, an average of the number of outstanding shares for a particular period that are currently in the market available for trading is used in the EPS figure.

When this figure of shares outstanding is used, EPS is known as "primary" EPS. Although this would seem the easiest route to take in calculating EPS, it can seriously understate the number of shares potentially available, leading to an overstatement in EPS for a particular period.

If you think EPS is higher than it actually is, you may accord a certain value to a company that may not be there. That's one reason why it's important to understand the variables involved in calculating EPS.

This second way of calculating the potential number of shares outstanding is known as "diluted" EPS. It includes all the shares that would be outstanding if stock options and warrants were converted to actual shares at a certain time.

Stock options and warrants allow their holders to purchase stock in a company at a certain price and at a certain time. Stock options are widely used to reward company executives and employees for superior stock price performance.

When examining EPS, investors and professional analysts prefer diluted EPS because it's a more conservative figure than primary EPS. Some companies that don't use stock options or that expense them in certain ways might have primary and diluted EPS that are the same figure.

Estimating EPS

Now what's the big deal about analysts' estimates? Actually, they aren't a big deal. Professional analysts are focused on the short term and how companies perform in a three- or six-month period.

Long-term investors focus on how a company performs during a number of years. Although consistent, strong performance is preferred, occasional fluctuations in quarterly earnings based on short-term factors aren't important.

In fact, many growth-oriented long-term investors seize buying opportunities in a particular company's stock if it fails to meet analysts' estimates. A company's stock price may fall if EPS is up 18% where analysts expected 20%.

The long-term investor realizes that an 18% increase in EPS is still a solid number, regardless of the expectations of professional analysts.

The bottom line

Like many financial numbers, EPS can be complicated. The most important factor is to be aware of the types of EPS and the reliability (or lack thereof) of analysts' estimates.

by Amy Buttell

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You're thinking one way out of this dilemma would be to rent out your home for a while until you can sell it for a decent price. But before you stick a "for rent" sign in your front lawn, you have many factors to weigh.

Are you up to this?

First, recognize that renting out your home is an emotional issue, not just a financial one. If you've lived in the house for years, it represents an important part of your life. You may worry that renters won't take proper care of it.

Homeowners with an emotional attachment to their home often "get intrusive as landlords," points out Danielle Babb, author of "The Accidental Landlord: How to Rent Your Home When It Doesn't Make Sense to Sell It."

"They may be rational people," she adds, "but when it comes to the house they've been living in, they want to come by every three days to check on it. They want to get too involved in the tenant's life."

Not only is that sort of behavior likely to vex your tenants, it also may land you in legal trouble, says Janet Portman, a real estate attorney and author of "First-Time Landlord: Renting Out a Single-Family Home."

One of the biggest mistakes homeowners-turned-landlords make is "they think, 'It's my property; I'll make the rules,' " Portman explains. "They really do think they can legally do all sorts of things they're not entitled to do, like coming over any time to check on the house, or setting their own rules on who can live there." The reality is that federal, state, and, in some cases, local laws set parameters for what landlords and tenants can do.

If you can't let go of your house emotionally, don't rent it out, Portman advises. If you're going to become a landlord, you have to be ready to think like a landlord, not a homeowner. "This is a business now," she emphasizes.

Think like a landlord

Becoming a landlord amounts to an additional job. You'll have to advertise and screen tenants. You'll need to have the skills and time to do repairs and maintenance. Even if you hire people to do the work, you're still in charge. "You're the one who will get the call on a Sunday morning that the toilet is plugged," Portman notes.

You'll also be the one who has to get rid of tenants who don't pay their rent, even if they're nice people. Then there are those not-so-nice tenants you'll wish you'd never met. Plus, you'll need to invest time to familiarize yourself with federal, state, and local laws governing rental properties.

One way to handle the time-consuming and bothersome aspects of being a landlord is to hire a property management company to take care of not only repairs and maintenance, but also advertising, screening tenants, negotiating leases, collecting rent money, dealing with problem tenants, and so on. To find a management company, ask other landlords for recommendations. The National Association of Residential Property Managers, headquartered in Chesapeake, Va., also can help.

Professional property managers "know the laws," Babb says, "and they have established methods of advertising properties. They also have working relationships with businesses in the area. So when their employees need to relocate, businesses will go to a property management company to look for rentals to get a better deal."

But, of course, a property manager's services come at a price—typically 6% to 10% of the monthly rent, Babb says.

That brings up another critical issue. How much should you charge for rent? Some homeowners think they'll charge whatever their monthly mortgage payment is, so they'll break even. They're forgetting added costs: maintenance, repairs, landlord insurance, vacancy periods when they earn no rental income, and so on.

Adding up all those expenses still may not give you the right rent figure. "People make the mistake of thinking if they need this much money, they'll set the rent to that amount," Portman says. "But to be able to rent your house, you'll have to rent it at market rates."

Consider, too, the current state of the local rental market. If a lot of homeowners have the same idea as you, there may be a glut of houses for rent. "It's very area-dependent," Babb says. "If you're in an area where jobs are coming in, you have a better chance of breaking even."

But, she adds, you might want to rent even if you'll suffer a financial loss each month. You'll get tax deductions for business expenses, which may help your financial situation. And by waiting to sell, you may more than make up in purchase price what you lost while renting.

Still, this strategy isn't for everyone. You have to look at your situation. Can you absorb that monthly financial hit for several months or longer? Can you afford to take the chance that house prices will recover?

Before you rent out your home, research:

• Market rates - You'll need to charge a competitive rent for your area. Scour local ads and craigslist. Another online source Babb recommends is rentometer.com, which not only shows going rates, but also has renters' comments about properties. "If people complain about noise in an area and you have a place there that doesn't have noise," she points out, "that's a good selling factor for you to use."
  
  
• Federal, state, and local laws - You must adhere to laws each step of the way, from selecting tenants, to the lease you use, to handling security deposits, to maintaining the property, to evicting tenants. The U.S. Department of Housing and Urban Development and the Landlord Protection Agency are just two of many sources for information on laws.
  
  
• Lender's rights - Your home loan may state that your house is "owner-occupied", so contact your mortage lender. The terms of your loan may or may not change. The lender might add a rider saying that, if you default on your loan payments, the lender may have the option of collecting rent directly from your tenants.
  
  
• Insurance - You may have to get new insurance, as your current homeowners policy may not cover your house if you rent it out. This varies by company. Don't just assume your coverage will continue.
  
  
• Tenants - Obtain a credit report for a prospective tenant, get employment history, and talk to current and former landlords. Bear in mind that a tenant's current landlord may give a good reference just to get rid of that person. So find out what previous landlords have to say. "The most important decision in this whole process is whom you pick to live in your house," Portman says. "If you're in a hurry or just go with your gut that someone is going to work out, you're looking for trouble."

by Dianne Molvig

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"Small-business fraud can come from internal threats, such as employee fraud, or from external full-time scammers," says Alison Southwick, Better Business Bureau (BBB) spokeswoman. "Because small-business owners often lack the time and resources to fight fraud, they are a popular mark for any number of different scams."

The Credit Union National Association's News Now reports that the BBB advises business owners to watch out for these scams:

• Directory scams - Usually the scammer will call a business to "update" the company's entry in an online directory, or the scammer might lie about being with the Yellow Pages. The business is later billed hundreds of dollars for listing services it didn't agree to or for ads it thought would be in the Yellow Pages.
  
  
• Office supply scams - Some scammers prey on small-business owners and hope they won't notice a bill for office supplies, such as toner or paper, that the company never ordered.
  
  
• Overpayment scams - Business employees should be cautious if a customer overpays using a check or credit card and then asks the business to wire the extra money back to the customer or to a third party. Overpayment scams often target catering businesses, manufacturers, wholesalers, and even sellers on sites like eBay, Craigslist, and Etsy.
  
  
• Data breaches - No matter how vigilant a company is, a data breach still can happen. Whether it's the result of hackers, negligence, or a disgruntled employee, a data breach can have a severe impact on the level of trust customers have in a business.
  
  
• Vanity awards - While it's flattering to be recognized for hard work, some awards are just money-making schemes and have no actual merit. If you're approached about receiving a business or leadership award, research the opportunity carefully and be especially wary if you're asked to pay money.
  
  
• Stolen identity - Scammers often will pose as legitimate companies to rip off consumers. A company whose identity is stolen doesn't necessarily lose money, but its reputation is potentially tarnished when angry customers, ripped off by the scammers, think the real company is responsible.
  
  
• Phishing e-mails - Some phishing e-mails specifically target small-business owners with the goal of hacking into their computers or networks. Common examples include e-mails pretending to be from the Internal Revenue Service that claim the company is being audited, or phony e-mails from the BBB saying the company has received a complaint. Company employees receiving suspicious e-mail from a government agency or the BBB should not click on the links or open attachments. Contact the agency or the BBB directly to confirm the legitimacy of the e-mail.

by Center for Personal Finance editors

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There are several ways to balance your checking account. You don't have to invest in financial software, but some find using software such as MS Money or Excel helps them to track their budgeting and spending habits, too.

You can reconcile your account by going online or using a paper statement from your financial institution. Here's what to do:

1. In your check register, place a checkmark next to the withdrawals you've entered for checks, debit and ATM withdrawals that match those listed on your statement.
   
   
2. If you forgot to enter any withdrawals in your checkbook, now is the time to do so. Enter those items listed on your statement as having cleared, including checks, debit and ATM transactions, automatic withdrawals, online bill payments, or monthly fees.
   
   
3. Now place a checkmark next to each deposit you've entered that matches those listed on your statement.
   
   
4. Again, if you've forgotten to enter a deposit in your checkbook, do so now. This includes cash or checks you've deposited as well as automatic deposits such as your paycheck.
   
   
5. Now it's time to see whether the total in your account after tallying your deposits and withdrawals matches what is listed on your statement. Take the beginning balance you show in your check register, add in all the deposits and subtract out the withdrawals to come to your actual current balance.
   
   
6. Take your actual balance, then back out the deposits made but not yet cleared, and add back the withdrawals not shown on your statement as having cleared yet. This new adjusted balance should equal the one shown on your statement.
   
   
7. What do you do if you don't balance? Don't panic, it may only be a calculation error. Try running the numbers again using a calculator. If you're still out of balance, then, repeat the process of verifying you have marked every cleared withdrawal and deposit in your checkbook. See if you have earlier transactions than the current month that still have not cleared.

Make a commitment to this process each month to ensure that your balance agrees with that shown on your statement and that there's been no unauthorized access to your account. If you find an error, be sure to contact your financial institution right away.

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1. Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form is available on SSA's website at www.socialsecurity.gov, by calling 800-772-1213 or at local offices.
   
   
2. Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from IRS.gov or order it by calling 800-TAX-FORM (800-829-3676).
   
   
3. Notify the U.S.Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.
   
   
4. Notify Your Employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
   
   
5. Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee's Withholding Allowance Certificate, you can print out and give to your employer so they can withhold the correct amount from your pay.
   
   

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You can reduce the chances of being audited by avoiding certain "red flags" that can raise suspicions about your tax return, such as:

• Claiming deductions for charitable donations that are not proportionate to your income.
  
  
• Claiming deductions for travel and entertainment that are not proportionate to your income.
  
  
• Under-reporting income (for example, taxi drivers or restaurant employees not reporting or under-reporting tip income).
  
  
• Claiming itemized deductions of more than 35% of gross income.
  
  
• Deducting home office expenses while working in an office.
  
  
• Claiming bad debts.
  
  
• Paying wages to children or a spouse, splitting income among relatives, or lending money to family members.
  
  
• Making errors on personal information (misspelling your name, wrong address, etc.).
  
  

You can decrease your chances of being audited by:

• Being honest about your deductions and income.
  
  
• Keeping meticulous records.
  
  
• Having your tax return prepared by competent professional.
  
  
• Filing your return electronically (which eliminates data entry errors at the IRS).

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