Earnings – A Fundamental Concept

Earnings are the after-effects of cost of production. These include the value created by the business from its tangible assets and its intangible assets such as goodwill, guarantees and licenses. Earnings per share (EPS) is the price per share that a company pays to the shareholders. Earnings refers to the total profit that a company earns. For an explanation of some economic concepts, more specific terms such as EBIT, EBITDA and FOC are used.


Earnings represent the income realized from the sale or transfer of securities and other loans and represents the value of ownership in the enterprise less the outstanding capital employed in the business. The difference between gross income and net income is referred to net income. Earnings at period end represent the period end of one cycle of profit or loss. It is measured at the end of the period or the reporting period.

An essential part of the Earnings Approach is the calculation of net income. The net income statement is a statement that gives information about the income from the sales of goods and services and from the investment in property, capital assets and payroll. This is calculated by the following methods: The first method is the actual cash flow method, the second is the gross profit method and the third is the operating profit method. Net income is calculated by taking into account the income statement, free cash flow and balance sheet items.