Earnings definition
What does Earnings mean?
The annual profits of a company after deduction of tax, dividends to preference shareholders and bondholders. Earnings are usually expressed on a per-share basis (eg 7p), and the earnings per share (EPS) figure is calculated by dividing total earnings by the average number of shares in issue for the relevant accounting period. For example, earnings of £2 million, with 10 million shares in issue would give an EPS of 20p. You may see earnings used in several ways: • reported earnings: the figure in the company’s accounts • underlying earnings: the figure derived from reported earnings by excluding any one-off items (eg profit from the sale of land which is not part of the company’s normal business) • diluted earnings: earnings after adjustment has been made for shares that may be issued in the future if holders of options, warrants and convertibles choose to exercise their rights.