Understanding Company Earnings

Understanding Company Earnings

  • Submitted By: spacee3
  • Date Submitted: 03/05/2009 4:37 PM
  • Category: Business
  • Words: 359
  • Page: 2
  • Views: 306

Understanding Company Earnings


In this section, you will learn about corporate earnings and why they are important to you as an investor. You will learn what goes into corporate earnings and how to use earnings information to make a decision about investing in a corporation. We will discuss the following topics:

What Are Company Earnings?
Why Are Earnings Important to You as an Investor?
What Makes Up Corporate Earnings?
Where Do You Find Corporate Earnings Information?
How Do You Use Earnings Information to Make an Investment Decision?
What Are Company Earnings?

Business 101: You go into business to make money. Unless an organization is a not-for-profit enterprise, its goal is to make money for the owners. In order to make money, the business must have income to pay its employees, utility bills, costs of production and other operating expenses. If a company has cash left over after paying its expenses, it has earnings. Earnings are a company's net profit.

The nature of a business defines how it makes earnings. Two sources of company earnings are income from sales of goods or services and income from investment. For example, a manufacturer produces goods for sale to its customers. A bank sells depository services to its customers. All businesses generate income by providing either goods or services to customers.

Another source of income is investment. Investments generate income for businesses and individuals from either interest on loans, dividends from other businesses, or gains on the sale of investment property.

Company earnings are the sum of income from sales or investment after paying its expenses. Sounds simple enough, but what does this have to do with you?


Why Are Earnings Important to You as an Investor?

Remember from the previous lesson that people go into business to make money. Well, if you invest in a company's stock, you gain an undivided share of the company. Typically, when a company earns more...

Similar Essays