Earnings

Earnings are the profits a company makes after deducting all costs of doing business. Earnings are also referred to as net income or profit. Earnings are an important measure of a company's financial health and are used by investors to evaluate a company's potential for future growth.

There are two main types of earnings: operating earnings and net earnings. Operating earnings are a company's earnings before interest, taxes, depreciation, and amortization (EBITDA). Net earnings are a company's earnings after interest, taxes, depreciation, and amortization.

Operating earnings are a good measure of a company's profitability because they exclude non-cash expenses such as depreciation and amortization. Net earnings are a more comprehensive measure of a company's profitability because they include all expenses, both cash and non-cash.

Earnings are an important part of a company's financial statements. The income statement is a financial statement that summarizes a company's earnings over a period of time. The income statement includes the following items:

• Revenue: The amount of money a company generates from its business activities.
• Cost of goods sold: The cost of the goods a company sells.
• Gross profit: The difference between revenue and cost of goods sold.
• Operating expenses: The expenses a company incurs in its day-to-day operations.
• Operating income: The difference between gross profit and operating expenses.
• Interest expense: The interest a company pays on its debt.
• Taxes: The taxes a company pays.
• Net income: The difference between operating income and interest expense, taxes, depreciation, and amortization.

Earnings are also an important part of a company's cash flow statement. The cash flow statement summarizes a company's cash inflows and outflows over a period of time. The cash flow statement includes the following items:

• Cash from operations: The cash a company generates from its business activities.
• Cash from investing activities: The cash a company generates from investing activities, such as selling investments or buying property.
• Cash from financing activities: The cash a company generates from financing activities, such as issuing debt or equity.
• Net change in cash: The difference between cash from operations, cash from investing activities, and cash from financing activities.

Earnings are an important part of a company's financial analysis. Investors use earnings to evaluate a company's financial health and potential for future growth. Earnings are also used by analysts to compare companies within the same industry.