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Earnings before interest and, taxes (EBIT) |
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Earnings before interest and, taxes (EBIT)A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes.Earnings before interest and, taxes (EBIT) Similar MatchesNormalized earningsNormalized earningsEarnings that have been adjusted in order to take into account the effect of cycles in the economy. State Earnings Related Pension SchemeState Earnings Related Pension SchemeA government scheme introduced in April 1978 which enables employees (but not the self-employed) to top up the basic pension they receive on retirement with additional pension payments based on their earnings.Employees make payments to SERPS by way of Class 1 National Insurance (NI) contributions. They can 'contract out' of SERPS and pay Class 1 contributions via a rebate which may be invested in an occupational pension or a personal pension plan.SERPS was replaced in April 2002 with the 'State Second Pension' which is designed to give more to the lower paid and middle earners, carers and the long-term disabled with broken work records. Whereas with SERPS, the more you earn, the higher your pension, S2P operate a flat rate which means that high earners will be better off opting for private pension schemes. Earnings before interest, taxes, and depreciation (EBITD)Earnings before interest, taxes, and depreciation (EBITD)A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation expenses are not included in the costs. Earnings per shareEarnings per shareEarning per Share (EPS) = Earnings / Number of Shares in IssueEPS is a key ratio used in share valuations. It shows how much of the company's profits, after tax, each shareholder owns.Example: Goodco makes a post-tax profit of £1.2 million. There are 20 million shares in issue. EPS = £0.6What starts out as an easy calculation gets complicated because the rules on what constitute earnings are fuzzy, especially when it comes to 'extraordinary' items:When an industrial manufacturer sells a large parcel of land to a developer should that profit be treated the same as the profits from its mainstream activities?If its profits one year are wiped out by an uninsurable natural disaster at its plant, should that event be regarded as just a normal cost of doing business?Until recently companies had discretion about how they treated one-offs. They could call an unusual profit 'exceptional' and include it in their EPS, and call an unusual loss 'extraordinary' and exclude it from EPS. This made it very difficult for investors to gauge the true progress of the business.Various Financial Reporting Standards (FRS) have tried to regularise treatment of one-offs, but if anything have made analysis harder. Large companies now report EPS in different ways, and the challenge for investors is knowing what basis has been used. When newspapers report EPS they use 'adjusted' EPS (also known as 'headline earnings') which strips out all profits/losses attributable to non-core activities. Primary earnings per (common) sharePrimary earnings per (common) shareEarnings available for the payment of dividends to common stockholders divided by the number of common shares outstanding. Further Suggestionsearnings capprice earnings growth factor Fully diluted earnings per shares Accounting earnings Earnings momentum Retained earnings earnings yield earnings lower earnings limit normalised earnings taxable earnings Quality of earnings earnings factor Earnings price ratio Earnings before taxes (EBT) adjusted earnings band earnings Pretax earnings or profits retained earnings Earnings yield Earnings Earnings before interest, taxes, depreciation, and amortization (EBITDA) price earnings ratio (P/E ratio) upper earnings level Earnings before interest after taxes (EBIAT) |
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