Earnings are the monetary benefits of the operation of a company. Earnings refers to the revenue earned by a business on which tax is charged. There are many other terms for earning and some of them are EBITDA and EBIT. EBITDA is the profit figure, expressed as a percentage of revenue and EBIT is equal to the cost of capitalized items less the gross charge.

Key Takeaways: To understand the financial statements a good understanding of key terms such as EBIT, EBITDA, gross profit, gross margin, and free cash flow is essential. Understanding the difference between these three terms can be crucial in determining the overall health of the company. Key takeaways are often used interchangeably, especially in the corporate world, but they do not mean the same thing. Key takeaways from the financial statements include the following:

Operating profit is the money that has been made up of the gross profit and the net profit. Net profit is the income statement and the difference between the gross profit and the operating profit. Gross margin is the difference between the total assets and liabilities and the gross revenue. Free cash flow is defined as the operating profit minus the investment made in buying and selling assets. Understanding these three terms along with the different types of financial statements and how they relate to the company’s profits can help you make the right decisions regarding your own finances.