What is the basic formula for calculating earnings per share (EPS)?

The correct approach to calculating earnings per share (EPS) involves taking the income available to common shareholders and dividing it by the weighted average number of common shares outstanding. This metric provides insight into how much profit a company is generating for each share of stock, which is crucial for investors assessing a company’s profitability on a per-share basis.

Using the net income alone would not provide an accurate picture since net income may include earnings allocated to preferred shareholders, and EPS specifically pertains to common shareholders. Therefore, it's essential to focus on the portion of income available specifically to common shareholders. Additionally, the use of the weighted average number of shares accounts for any changes in the number of shares outstanding throughout the reporting period, such as new issuances or buybacks, resulting in a more accurate EPS calculation for investors.

Other options provided either focus on incorrect components for EPS calculation or apply the calculation to different types of shares, which are not relevant to determining the EPS for common stockholders specifically. The proper formulation offered ensures that the financial metric reflects the true earnings attributable to the common shareholders of the company.