Earnings Ratios & Reviews


Earnings Ratios & Reviews

Earnings are simply the financial benefit of a company’s operation. It should be noted that earnings are different from income. Earnings are also the income on which corporate taxation is payable. Many more specialized terms are also used as EBIT and EBITDA for an examination of certain aspects of internal operations. These terms stand for actual and implied profit, income taxes payable, and tax payments due.

Earnings can change for many reasons such as the impact of one investment decision or other like in the case of changing customer preferences, inflation and market conditions affecting businesses. However, the key drivers of earnings growth and profitability remain strong financial performance, strong management support and effective control measures, high quality credit and capital financing, diversification and geographic markets penetration. All these contribute to the profitability and growth of the company.

The difference between gross income and net income is the net income including expenses. Gross income includes the value obtained by deducting expenses from the value of the business, less the income arising from the sale of assets. Net income on the other hand represents the value of the business after the deduction of expenses from the gross sale price. The difference between these two numbers is the income received from the shareholders after the deduction of their share of capital stock and retained earnings.