Earnings are basically the profits of a company. Earnings per share (EPS) is the measure on which corporation tax is calculated. For a detailed analysis of various aspects of corporate operations, many other more technical terms are also used such as EBIT and EBITDA. The profit of a company is determined by assessing the income of the company divided by its assets, liabilities, revenues and expenses.
The term ‘earnings’ in the United States English is defined as the total revenue collected by the company from its customers during a period of one year. It should be noted that this is different from the income statement, which is the statement that will show the income earned by the company in a year ending. The difference between these two measurements is the method of calculation. While the income statement uses the total revenue of the company as a basis, earnings per share uses the weighted average cost of goods sold, less selling and administrative expenses per unit to calculate earnings. The other main difference between the two measurements is that one relies heavily on the information provided by the corporation while the other relies solely on the owners’ reports.
The gross profit, as the name suggests, is the product of prices charged to customers and a unit is the price paid to the workers in one year. The gross profit margin is a ratio of gross profit to the total number of units sold. Other measures of profitability are profit per share (PPS) and sales per dollar. PPS is calculated by dividing the net income by the average weekly earnings of the common shareholders. On the other hand, sales per dollar is calculated by deducting the cost of sales from the average price paid by buyers to sellers.