How to Understand the Earnings Side of Your Financial Statements

Earnings are basically the net profits of a company’s operation. Earnings per share (EPS) is the figure on which corporate taxation is based. The profit made by the corporation at the end of the period of ownership is called the Earnings per Share. Some more specialized terms for an examination of certain aspects of corporate operations are EBIT and EBITDA. Both these terms have different meaning in financial accounting systems.

Net Income Statement refers to an income statement that includes the gross profit, the net income from continuing operations less the expenses related to the operations, and the shareholders equity. Generally the term NDS is used when the corporation makes a sale or purchases some of its assets other than its capital stock and the word ODD is used when the corporation does not make a sale or purchase but the transaction is still carried out. From the term EBITDA we get the Return on Exchange Traded Fund (ROEX).

There are several types of financial statements and one of them is the Financial Accounting Standards Board (FASB) definition of earnings. This definition states that earnings are the income that is generated from the operations of the business and include revenues, expenses, and net earnings. It does not include the results of the business’s investment portfolio, goodwill, and intangibles. To get comprehensive information on the performance of the company’s earnings it is important to examine the company’s income statement along with the statement of cash flows.