Earnings refers to the monetary benefits of the operation of a company. It generally refers to the gross profit or cash flow generated by the company during a particular period of time. Earnings is the income on which corporate taxation is based. For an accounting analysis of certain aspects of organizational operations, other more technical terms like EBIT and EBITDA are sometimes used. These terms mean income from continuing operations, as well as earnings excluding financing charges.
Some companies use certain methods to calculate the earnings that may be taxable or may not be. The method used is primarily based on the nature of the business and the sector in which it operates. A company’s financial records are usually required to be examined to determine the effect of financial transactions, both consummated and uncorrected, on the taxable income and therefore net earnings of the organization.
One accounting measurement commonly associated with earnings is gross profit. The definition of gross profit is the total revenue less the cost of supplies or goods sold, less any Federal, State, and local taxes, if any. The cost of supplies generally includes the cost of production. A company’s gross profit is a measure of its profit and all of the other measures relating to profit are related to this single basis.