What does Earnings mean?

What does Earnings mean?

Earnings is another word for the net income of a company. It is one of the most important numbers in corporate finance.

If a company cannot show earnings, and growth in earnings, investors aren’t going to stick around. Earnings are normally computed as revenue minus taxes and expenses. It is synonymous with net income. Earnings is a positive cash outlay for the year, which means the company is not operating at a deficit.

Earnings-Per-Share (EPS) is a ratio used to show each stockholder how much of the company’s earnings “belong” to the holder of each share, which is calculated by dividing the earnings for the year by the number of shares in circulation. Companies tend to host an “earnings call” every quarter to publicly share their earnings report over a webcast or conference call.

Before the earnings announcements, which come during what’s called Earnings Season the weeks after each quarter’s end, analysts will public earnings forecasts to give investors a best-guess estimate of what the announcement will be. Earnings growth is also an important metric which reveals the rate at which earnings has been increasing year-to-year, if at all.

Earnings is also part of EBITDA, a frequently used metric, which is Earnings Before Interest Taxes Depreciation and Amortization. To arrive at the earnings “before” all of those things, the earnings/net income has the taxes and other expenses added into it.

Earnings and EBITDA are some of the most important numbers for corporations and their investors.

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