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# Pretax earnings or profits

Net income before federal income taxes are subtracted.

Pretax earnings or profits

# Earnings factor

Earnings factor

This is a theoretical earnings figure that is used for working out state pensions or guaranteed minimum pensions.

# Earnings

Earnings

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 (e.g. 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.E.g. earnings of £2m, with 10m shares in issue would give an EPS of 20pYou may see earnings used in several ways:Reported earnings: the figure in the company's accountsUnderlying earnings: the figure derived from reported earnings by excluding any one-off items (e.g. 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.

# Price earnings ratio (P/E ratio)

Price earnings ratio (P/E ratio)

P/E = current share price of a company divided by its earnings per shareA company with a share price of 100p and earnings per share (EPS) of 5p has a P/E ratio of 100/5 = 20.A company's P/E (also known as its multiple) shows how high its shares are priced in relation to its historical earnings. Although mathematically, it relates share price to past performance, the reality is that P/Es are more about forward expectations than the past. A high P/E indicates that the City expects the company's earnings to grow fast in the future.P/E 're-ratings' by the City can have a dramatic effect on share price. If a company regarded as a growth stock announces sharply reduced trading figures, fund managers may revise their view of the company, and decide that it doesn't justify a growth stock P/E of 20, and can only justify a more normal P/E of, say 12. If earnings were 10p share, that re-rating would suggest a change in share price from 200p to 120p.Equally, if a company announces some major technical breakthrough, or a major contract, the City may decide that its future earnings potential justifies a growth P/E, and re-rate it upwards from 12 to 20 (or equivalent figures). In which case the share price will leap.There is nothing formal about this re-rating procedure. It is simply buyers in the market pushing up the price to reflect a new perception of a company. But P/Es do tend to be comparative, in that companies in the same sector with similar prospects would normally have similar P/Es. If they don't, there is invariably a reason accounting for the difference.

# Earnings before interest and, taxes (EBIT)

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 cap

Earnings cap

A term which relates to a person's final salary in an occupational pension scheme taken out on or after 1st June 1989 (or 14th March 1989 if the scheme was new at that time) and is the upper limit of earnings allowable under the scheme.The upper limit of net relevant earnings qualifying for tax relief in a personal pension plan, which in turn limits contributions.

# Further Suggestions

Earnings before interest, taxes, and depreciation (EBITD)
Primary earnings per (common) share
price earnings growth factor
Earnings response coefficient
retained earnings
Earnings price ratio
Earnings retention ratio
Earnings momentum
Normalized earnings
earnings per share
band earnings
Earnings before interest after taxes (EBIAT)
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
lower earnings limit
Earnings before taxes (EBT)