earnings

(noun)

Business profits.

Related Terms

Examples of earnings in the following topics:

  • Introduction to the Retained Earning Statement

    • The statement of retained earnings explains the changes in a company's retained earnings over the reporting period.
    • The retained earnings statement explains the changes in a company's retained earnings over the reporting period.
    • The retained earnings statement may appear in the balance sheet, in a combined income statement and changes in retained earnings statement, or as a separate schedule.
    • The retained earnings account on the balance sheet represents an accumulation of earnings since net profits and losses are added/subtracted from the account from period to period.
    • Ending Retained Earnings = Beginning Retained Earnings − Dividends Paid + Net Income.

  • Times Interest Earned Ratio

    • Times Interest Earned Ratio = (EBIT or EBITDA) / (Required Interest Payments), and is indicative of a company's financial strength.
    • Times Interest Earned Ratio = Earnings before Interest and Taxes (EBIT) / Interest Expense.
    • Analysts will sometimes use EBITDA instead of EBIT when calculating the Times Interest Earned Ratio.
    • Typically, a Times Interest Earned Ratio below 2.5 is considered a warning sign of financial distress.
    • The Times Interest Earned Ratio is an indication of a company's overall financial health.

  • The Cost of Retained Earnings

    • Retained earnings and losses are cumulative from year to year, with losses offsetting earnings.
    • Retained earnings can be expressed as a ratio known as the "retention rate. "
    • The retention rate and the dividend payout rate are opposites, as are retained earnings and dividends paid out.
    • Therefore, we also can calculate retained earnings by subtracting dividends paid out from total net income.
    • Generally, the cost of retained earnings is slightly less than the cost of common stock.

  • The Statement of Equity

    • A retained earnings statement is required by the U.S.
    • Retained earnings are part of the balance sheet under "stockholders equity (shareholders' equity)" and is mostly affected by net income earned during a period of time by the company minus any dividends paid to the company's owners and stockholders.
    • The retained earnings account on the balance sheet is said to represent an "accumulation of earnings" since net profits and losses are added / subtracted from the account from period to period.
    • Retained earnings are part of the statement of changes in equity.
    • The general equation can be expressed as following: ending retained earnings = beginning retained earnings − dividends paid + net income

  • Price/Earnings Ratio

    • Price to earnings ratio (market price per share / annual earnings per share) is used as a guide to the relative values of companies.
    • The price is in currency per share, while earnings are in currency per share per year, so the P/E ratio shows the number of years of earnings that would be required to pay back the purchase price, ignoring inflation, earnings growth, and the time value of money.
    • P/E ratio = Market price per share / Annual earnings per share
    • Monthly earnings data for individual companies are not available, and usually fluctuate seasonally, so the previous four quarterly earnings reports are used, and earnings per share are updated quarterly.
    • Longer-term P/E data, such as Shiller's, use net earnings.

  • Relationship Between Dividend Payments and the Growth Rate

    • The portion of the earnings not paid to investors is, ideally, left for investment in order to provide for future earnings growth.
    • Capital that is kept from investors is known as retained earnings.
    • Firms that can do this tend to retain more of their earnings.
    • As they mature, they tend to return more of the earnings back to investors.
    • Note that dividend payout ratio is calculated as dividend per share divided by earnings per share.

  • Earnings per Share

    • Earnings per share (EPS) is the amount of a company's earnings per each outstanding share of a company's stock.
    • Earnings per share (EPS) is the amount of earnings per each outstanding share of a company's stock.
    • Earnings per share for continuing operations and net income are more complicated; any preferred dividends are removed from net income before calculating EPS.
    • Diluted Earnings Per Share (diluted EPS) is a company's earnings per share (EPS) calculated using fully diluted outstanding shares (i.e. including the impact of stock option grants and convertible bonds).
    • Morningstar reports diluted EPS "Earnings/Share $" (net income minus preferred stock dividends divided by the weighted average of common stock shares outstanding over the past year).

  • Special Reporting

    • Other special reporting issues include Earnings per Share, Retained Earnings and Intraperiod Tax Allocation.
    • Earnings per Share: If a company reports any irregular items on its income statement, then it must report earnings per share for those items.
    • Earnings per share measures the dollars earned by each share of common stock.
    • Diluted earnings per share are considered a more reliable way to measure earnings per share.
    • Retained Earnings: The statement of retained earnings explains the changes in a company's retained earnings over the reporting period.

  • Calculating Diluted Earnings per Share

    • Diluted earnings per share (EPS) takes the basic EPS formula and accounts for the effect of dilutive shares on earnings.
    • So, basic earnings per share tends to have a higher value than diluted earnings per share.
    • Diluted earnings per share is the most conservative per share earnings number because the equation takes into account the largest number of common shares that could be outstanding.
    • Earnings per share shows the amount of income applicable to each share of common stock.
    • Explain why a company would calculate diluted earning per share for its stock

  • Multi-Period Investment

    • The first concept of accruing (or earning) interest is called "simple interest. " Simple interest means that you earn interest only on the principal.
    • That means you earn another $5 in the second year, and will earn $5 for every year of the investment.
    • In the third year, you earn interest of 5% of your balance, or $110.25.
    • You earn $5.51 in interest bringing your total to $115.76.
    • You don't earn interest on interest you previously earned.