What is earnings?

The earnings force is a proven ability of an individual, company or security to generate earnings or profits over time, provided that the conditions are optimal. Although there are different ways to calculate the exact extent of earnings, many methods include the consideration of the total assets of the subject, including any growth or loss that occurred from one accounting period to another. The general concept of earnings is useful in creating and improving a healthy financial strategy for households and for multinational corporations.

For individuals, earnings are often determined by the amount of income that the individual has shown the ability to produce in a given period, usually monthly or annually. The main factor of this type of calculation is based on the salary or wages obtained through full -time work. In situations where individuals develop secondary incomes, these earnings are also considered part of the overall effort to produce income this period. There is a certain difference in nAzores whether individuals should calculate this number on the basis of gross or net income. However, if the method is consistent, one of the pictures will be enough.

The company also benefits from precisely determining their current gainful force. In some cases, this number is based on earnings before paying interest and tax, which is sometimes called EBIT. Other companies may decide to establish their gainful energy more on the revenue of securities, such as a dividend return on stocks issued. A relatively new company may decide to determine the power of its earnings by looking in detail at the return on assets, such as invested capital used to create a new business.

The idea of ​​earnings is also associated with investment. The investor will want to look closely at the abilities of the security to generate income for theEDPOKD that market conditions are best. Exact screening of the earnings potential of investment helps to increase the chances of significant revenue from securities and minimize the possibility of losing.

It is important to realize that any calculation of earnings is based on the assumption that there are optimal conditions. If the conditions change, it will be necessary to re -calculate the ability of earnings. For example, if an individual suffers an injury that prevents him from continuing his current job, the expectations of earnings are modified to solve new circumstances. Assuming that the individual is still able to perform some other type of work, this new flow of income can form the basis for a new assessment of earnings.