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When you buy a share of stock, you are buying a piece of a company. Imagine that ABC Company, a fictional business, has sales of Rs 10,000,000/- and net income of Rs 1,000,000/- 

To raise money for expansion, the company’s founders approached a underwriting firm (an investment banker) and had them sell stock to the public. They might have said, “Okay, we don’t think your growth rate is great so we are going to price this so that future investors will earn 9% on their investment plus whatever growth you generate … that works out to around Rs 11,000,000 + value for the whole company "(Rs 11 million divided by Rs 1 million net income = 9% return on initial investment.)” Now, we’re going to assume that the founders sold out completely instead of issuing stock to the public (for an explanation of the difference

The underwriters may say, “You know, we want the stock to sell for Rs 25 per share because that seems affordable so we are going to cut the company into 440,000 pieces, or shares of stock (440,000 shares x Rs 25/- = Rs 11,000,000/-) That means that each “piece” or share of stock is entitled to Rs 2.72/- of the profit (Rs 1,000,000 profit ÷ 440,000 shares outstanding = Rs 2.72/- per share.)

This figure is known as Basic EPS (short for earnings per share.) In other words, when you buy a share of ABC Company, you are buying the right to your pro-rata profits. Were you to acquire 100 shares for Rs 2,500/- you would be buying Rs 272/- in annual profit plus whatever future growth (or losses) the company generated. If you thought that a new management could cause fudge sales to explode so that your pro-rata profits would be 5x higher in a few years, then this would be an extremely attractive investment.