Earnings?

What Are Earnings?

Income refers to the monetary value that a person, firm, business entity, or investment earns over a specified period and is usually expressed in terms of the amount of money received. Income can be broken down as follows: earnings from work, returns on business, investment returns, dividends, interest, royalties, and capital gains. This is called net money left after subtraction of costs, taxes, and other liabilities from overall revenues or earnings. Profit is in addition to one of the major indicators of economic performance which demonstrates how successful and sustainable operations or investments are. They are the foundation of financial analysis, decision making, valuation, and wealth creation.

Example

Publicly listed company reports its quarterly financial statements, which depict the company’s profits for the reporting period. The company announced total revenues of $10 million from goods and services sold during the quarter. After deducting all expenses that include depreciation, taxes, and interest paid, the firm is left with $2 million net income. This positive earning result indicates that the company is capable of generating profits from operations which is due to good management and financial discipline. Investors, analysts, and shareholders use earnings data to examine the company’s performance against the market projections, compare its performance with those of the competitors, and take investment, lending or partnering decisions based on the provided data. A good earnings growth may draw more investors and eventually increase the value of the company's stock price while bad earnings could point to some underlying issues or risks that would warrant investigation.