What Are Earnings?

What Are Earnings?

By Charles Joseph | Editor, Financial Affairs
Reviewed by Corey Michael | Senior Financial Analyst

Earnings refer to the amount of profit that a company generates during a specific period. Essentially, earnings are the business’s net income after the deduction of costs including operating expenses, taxes, the cost of goods sold (COGS), and interest payments. Earnings are typically reported quarterly (four times a year) and annually in the course of a financial year. Companies generally report their earnings per share (EPS), which represents the fraction of a company’s profit allotted to each outstanding share of common stock, providing an indicator of the company’s profitability.

Related Questions

1. How do you calculate earnings per share (EPS)?

Earnings Per Share (EPS) is computed by dividing net earnings (profit after taxes and dividends) by the number of outstanding shares of a company’s common stock.

2. Does an increase in earnings mean a company is doing well?

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Generally, an increase in earnings is a good sign and it often means the company is becoming more profitable. However, it’s also important to assess the sustainability of these earnings and to confirm whether they’re rising for sound reasons.

3. What is the difference between gross earnings and net earnings?

Gross earnings are a company’s total revenue, while net earnings are the profits after operating expenses, taxes, COGS, and interest payments have been deducted from gross earnings.

4. How often are earnings reported?

Most companies report their earnings quarterly, which implies four times in a financial year. However, they also release an annual report detailing earnings for the entire year.

5. Are earnings the same as profit?

Earnings are generally referred to as the net profit of a business. However, there can be various sorts of profit, like gross profit, operating profit, and net profit, each reflecting earnings at different stages of the operation and income calculation process.