Earnings are the monetary advantages of the performance of a company. Earnings per share, also called Ebit, is the income on which corporate taxation is based. It represents the earnings of a company from the sale of its common stock (the issuing company’s stock) and from the issue and repurchase of its preferred stock (the issuing company). Generally, for an assessment of certain aspects of corporate operations many other more specific terms are also used such as EBITDA and EBIT. However, the term EBIT means Earnings per Share and therefore refers to the monetary advantage of the issuing company over the cost of its equity and retained earnings.
The profit or loss obtained by a company from the sale of its stock or the issue and repurchase of its preferred stock represents the difference between the stock market price of the issuing company’s stock and the price at which they are sold or purchased. Consequently, an essential element in determining the value of the company’s assets and liabilities is the determination of the net worth per share as reflected in the stock market price on the day of trading. The difference between the value of the equity and the value of the liabilities is known as the net worth. The difference between the net worth per share and the market price of the stock is called the PEG ratio, which is used by financial analysts to assess the health of the company’s finances.
Some other terms commonly used in accounting are the GAAP (Generally Accepted Accounting Principles), the IFRS (International Financial Reporting Standards), U.S. generally accepted accounting principles (GAAP), and the REIC (real estate investment banking). A company’s income statement provides the information necessary to calculate the PEG ratio. All these terms can be difficult for non-financial analysts to understand. Therefore, most investment banking firms offer specialized services that simplify the complicated concepts used in the preparation of these reports.