How To Interpret The Earnings Of A Company

Earnings are basically the profits of a company. Earnings per share (EPS) is the single measure that represents the earnings of the company by the shareholders. Other measures commonly used are gross profit, gross margin, free cash flow and income tax. For a detailed description of the concepts behind these terms some more technical terms are also used as EBIT and EBITDA..


The difference between a profit and loss is the difference between the net income and the gross profit. The term net profit is used to represent the gross profit minus the net income. The gross profit is the more important indicator of profitability because it indicates the value of the company minus the value of the assets owned by the company. Net profit is made up from the gross profit. Net earnings are reported in the income statement or in the statement of earnings of a company.

Earnings are essential for the calculation of net earnings. The net earnings are reported in the statement of earnings of the company. A company must have adequate cash flow so as to be able to make payments to its employees and suppliers, if any. The balance sheet shows the balances as well as the income and other expenses of the company. A company must also have a profit and loss statement, cash flow statement, balance sheet, and statement of cash flows so as to understand its financial condition and performance.