What is the Earnings per Share (EPS) calculated by?

Earnings per Share (EPS) is a financial metric used to indicate the profitability of a company on a per-share basis, making it essential for assessing a company's financial health from a shareholder's perspective. The correct method to calculate EPS is by dividing the profit after tax by the number of issued ordinary shares. This calculation reflects the portion of a company's profit attributed to each outstanding share of common stock, allowing investors to gauge how much money a company earns per share they own.

The other options relate to different financial calculations that do not provide a measure of earnings per share. For example, calculating profit from operations divided by capital employed focuses on operational efficiency and return on capital, rather than profitability per share. Similarly, formulas that involve trade receivables or inventories are connected to working capital management and efficiency ratios, which serve other analytical purposes but do not pertain to EPS. Therefore, the EPS formula captures the essence of profitability per share needed for investors to evaluate their investment returns accurately.