Earnings

The Earnings figure is what the company has produced after all expenses have been deducted from Sales. It will be used to calculate the EPS and the PE Ratio. Then either held as Retained Earnings or paid as a Dividend.

At the end of an Accounting Period, a company reports its Net Earnings or Net Income, the last line in the Profit and Loss. To arrive at the Earnings figure, from Sales all the different expenses categories are deducted, Cost of Goods Sold, General and Administrative Expenses, Operating Expenses, Depreciation and Amortisation, Interest Expense and Taxes. Net Earnings is then used to pay a Dividend or be transferred to Shareholders Funds as Retained Earnings. The Net Earnings number is the basis for calculating Earnings per Share, which is calculated by dividing the Earnings number by the Number of Shares. Earnings is the critical number on the Profit and Loss.