The Accounting Basics – Key Takeaways From Accounting Reports
Earnings are simply the monetary advantages of the operation of a company. The basic definition of earnings is “the income from the business.” In more technical terms, earnings per share (EPS) is the income from the company per share of stock issued in its equity and less any dividends paid to the shareholders during the year. For a more detailed account of certain aspects of organizational operations, many more terms are commonly used as EBITDA and EBIT. These are generally defined as:
Many analysts use these key takeaways in their financial reporting and interpretation of company earnings. However, what is often not reported is how earnings are influenced by the economy in the rest of the world. What is most often reported is how revenues are growing from year to year, but this is only a good measure of how revenues may change from one year to the next. There are many factors that could affect a company’s ability to increase revenues, but if the company is experiencing problems, the future outlook for earnings may be dim. That is why it is important that company managers to take a long, hard look at all the components of the business that could impact future earnings and take action to protect the overall health of the company.
The above accounting practices is just one example of how basic accounting practices can affect earnings reports. Many other common accounting practices, as well as new technology and industry-specific issues will also affect the accuracy of earnings reports. As company managers and stock analysts strive to provide accurate and timely reports to their management and investors, they must also take into consideration all the factors that could potentially affect the earnings of a company.