How to Calculate Earnings

Earnings are the financial advantages of the operating profit of a company. Earnings per share (EPS) is the measure of earnings of the company divided by the value of the equity. Many other terms for earnings are also used such as EBIT and EBITDA for a comprehensive analysis of certain aspects of organizational operations. The word ‘earnings’ itself is derived from the Latin words ‘ear’ meaning voice, and’sig’ meaning to see. It can also mean getting money for something intangible such as a service, a right, or a contract.

Earnings

There are many measures of earnings. Generally, however, they are usually recorded in either gross or net income or gross profit and gross cost, depending on the kind of enterprise and the extent of its sales and production. Several measures of earnings are usually calculated on a monthly basis. One common measure of earnings, namely the gross profit, takes into account the value of goods sold less the cost of good sold. Another commonly used measure of earnings is net profit, which refers to the value of revenue less the cost of good sold.

There are many methods to calculate earnings. Usually, however, the most significant method to calculate revenue is to calculate it according to the income of the firm. According to this method, revenue is usually measured on a daily basis and is then multiplied by the cost of goods sold during a particular period of time. A number of financial ratios can be used to compare the value of the firm’s income to that of its expenses.