In our capitalist, market-driven system, the basic goal of any company is to make money for shareholders. The term for that money? Earnings.
The earnings figure represents the amount of money that's left from revenues once all the expenses are paid...the legendary bottom line, adjusted for accounting charges like depreciation, amortization, and other non-cash charges.
Or, said another way, the special thing about "earnings" versus just "cash profits" is that earnings takes into account the laws of accounting, which sometimes matter a lot when calculating a final number. Like...that $100 million factory really got a lot worse this year with wear and tear. It really should have $10 million in depreciation attached to the earnings number, becuase if it doesn't, one day the company will wake up and have no factory to run its business. Earnings is basically how companies and businesses are judged...or rather, value-assessed...especially public companies trading shares on the open market.
(Note on term usage: a company's results are often referred to generally as "earnings," as in "Apple is reporting its earnings tonight." More specifically, "earnings" means the amount of profit, as opposed to a loss. So you can end up with a sentence like "In today's earnings announcement, Whirlpool revealed a quarterly loss.")
Public companies will often report a few earnings figures. They will report a total figure, often known as "net income" or "net earnings" (or "net loss," if things have been less than rosey).
Firms will also include a figure for earnings per share. This stat takes the net income number and divides it by the number of outstanding shares. The EPS number takes the earnings amount to the shareholder level.
The size of the EPS will depend both on the size of the net income figure and on the number of shares outstanding. So when describing earnings, you might say something like "GE reported earnings of $3.2 billion, or $0.32 per share." The "per share" part of the EPS figure also leads to a situation where net earnings can move up, while EPS moves down (or vice versa). This only happens under rare conditions, usually when the move in net income is fairly slight and there's simultaneously a large change in the number of outstanding shares.
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Finance: What is Earnings Per Share (EPS...33 Views
finance a la shmoop what is earnings per share or EPS? okay you know the lemonade
stand the one with 20 grand in sales and 16 grand in gross profits and yeah will [Balance sheet for Lemonade Stands R Us appears]
spare you the gross jokes you know the customer asks lemonade.. what the fly
was doing in his lemonade and yes of course she said the backstroke what else
would you expect from the people at Schmo really?
so after gross profits there were operating expenses like those and then
operating profits down here that 7,500 thing then there were taxes and yeah
there are always taxes we can grumble about and then finally net income aka [Net income appears on balance sheet]
earnings but then below earnings you'll see that there are a hundred shares in
this little company the founder owns 60 of them mom owns 10 the new stepdad owns
20 he was guilted into it by you know the divorce lawyer and Enrique the
gardener for some reason who has cleverly weaseled his way into the
families arts and minds owns the last 10 its annual report time and the investors
want to know what their earnings per share were so that they can all compare
relative performance on their investments right so the total earnings
of the company in this example was five thousand two hundred fifty bucks which
means that the earnings per share of our little lemonade stand company here or
that 5,250 figure divided by a hundred or 52.50 a share that's [EPS formula appears]
what each share earned if you divvy the company into a hundred little pie slices
or parts so yeah earnings per share equals earnings per slice o pie or wait
lemonade pie has that been done yet time for a new business venture what do you [A plate of lemonade pie appears]
think we're taking investors just call us please
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