What is measured by "earnings per share" (EPS)?

Earnings per share (EPS) is a financial metric that indicates how much profit a company has earned for each share of its common stock. It is calculated by taking the net income of the company, subtracting any dividends paid on preferred shares, and then dividing this figure by the average number of outstanding shares of common stock.

This metric is significant because it provides investors with an understanding of a company's profitability on a per-share basis, allowing for easier comparison across companies in the same industry, regardless of their different sizes. A higher EPS suggests better profitability and efficiency in profit generation relative to the number of shares in circulation, making it a key indicator for investors when evaluating a company's financial health.

The other options do not reflect the function of EPS. Total revenue measures the total income generated from sales but does not account for the costs incurred to generate that revenue. The total number of shares outstanding refers solely to the quantity of shares issued by the company and has no direct bearing on profitability per share. Cash flow from operations concerns the liquidity and cash generation of a company but does not relate directly to earnings derived from net income. Thus, option B accurately captures the essence of what EPS measures.