Financial Terms “E”


Financial Terms Glossary


E


Earnings

Earnings are the net income or net profit of a company.


Earnings per share

Earnings per share or EPS is a financial measure of a company’s profitability. The EPS formula is:

earnings per share formula

EBIT

EBIT is earnings before interest and taxes. EBIT is also called operating profit or operating income. It is calculated as revenue minus operating expenses. EBIT represents the amount of cash available to pay creditors.


EBITDA

EBITDA is earnings before interest, taxes, depreciation, and amortization. It is calculated as EBIT + depreciation expense + amortization expense. EBITDA represents the amount of cash available to pay interest payments.


EBT

EBT is earnings before taxes. EBT is also called pretax profit. EBT represents the amount of cash available to pay taxes.

Equity

Equity is a claim on the assets by the owners of a business. It is calculated as assets minus liabilities. Equity is one of the five types of accounts. Equity is shown on the balance sheet and is the net worth of the business. Equity is also called stockholders’ equity or shareholders’ equity.


Expense

Expenses occur when assets are consumed by a business. Expenses are one of the five types of accounts. They are shown on the income statement.


Jeff Mankin

Jeff Mankin teaches financial literacy. His website is FinallyLearn.com.

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