Earnings Statement

Earnings statement is an important concept with respect to the assessment of the performance of a particular company. It is more or less similar to income statements, recording the earning details of a company.

As an important component of a company’s financial statement, Earning comprises of two main sections, namely the:
Operating section
Non-operating section

Operating Section:
The operating part of earnings consists of the following items:
Net Revenue: It is regarded as the inflow or increase in the assets of a company or settlements of its liabilities, at the time of production and delivery of goods, and rendering services to the customers.

Net revenue is calculated as:
Net Revenue = Sales � (Sales Discounts + Returns + Allowances)


Expenses: They refer to the utilization or outflow of assets or incurring liabilities at the time of producing and delivering commodities, as well as offering services to the customers, as a part of the principal activities of a commercial organization.
Following are considered to be important aspects of expense:
Price of the goods sold
Selling expenses
General and administrative expenses (G&A)

Non-operating Section:
The non-operating part of earnings is composed of the following:
Other Gains or Revenues: They are those incurred from other sources than the principal commercial activities of a company or business entity. Such gains and revenues take into account, the uncommon profits and losses.
Other Expenditures or Losses: Such expenses and losses are unrelated with the main commercial activities of a company or business entity.
Earnings Per Share (EPS):
The earnings returned on the initial investment amount is called the Earnings per share or EPS. In fact, it is this calculation which indicates the amount of money that the shareholders will receive for the individual share of stocks they own.

Calculation of EPS: EPS is calculated by dividing the total net income by the number of outstanding shares of a company. It is also calculated with the help of the following 3 formulae:
Earnings Per Share – Basic Formula:
Earnings Per Share = Profit/Weighted Average Common Shares
Earnings Per Share – Net Income Formula:
Earnings Per Share = Net Income/Weighted Average Common Shares
Earnings Per Share – Continuing Operations Formula:
Earnings Per Share = Income from Continuing Operations/Weighted Average Common Shares


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Last Updated on : 26th June 2013

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