If a company has ongoing debt (loans, etc.), is the cost of servicing that debt subtracted from revenue when EPS is calculated?

Put another way: If you had 2 stocks: S1, S2, and everything else was equal, and EPS for S1 (EPS1) was 10 and EPS2 was 5, but S1 had a lot of long term debt, would S1 still be worth more because :

  1. It has higher EPS (10/5, twice as much)
  2. The cost to service the Debt is already factored into EPS.
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    You are asking a lot of different questions here, but you seem to think they mean the same thing. What is your actual question - could you give an example of the comparison you are trying to make? Oct 22, 2020 at 1:31

1 Answer 1


In Financial Statement, Debt recorded under the balance sheet, while earning recorded in Income Statement. So, short answer, No. The firm's debt doesn't include earnings. But the interest expense does.

To give you an illustration: Firm S1 has 100 in earning, has 150 in Debt. Interest expense of that debt, let say 10% (15) included in Earning.

Hope this helps

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