Asset Earning Power - AEP

AAA

DEFINITION of 'Asset Earning Power - AEP'

The earnings generated by a business relative to its asset base. Asset earning power is a common performance measure in corporate finance, used to determine a firm's efficiency in generating earnings from its asset base. Asset earning power is calculated as:

Asset Earning Power = Earnings Before Taxes (EBT)/Total Assets.

INVESTOPEDIA EXPLAINS 'Asset Earning Power - AEP'

Typically, the higher the asset earnings power ratio a company has relative to others within its industry, the more efficient that firm is at generating cashflows from its asset base. For example, a company that reports earnings before taxes of $75 million, while carrying total assets on its balance sheet of $25 million, would have an asset earning power ratio of 3.0 times.

RELATED TERMS
  1. Capital

    1) Financial assets or the financial value of assets, such as ...
  2. Non-Core Assets

    Assets that are either not essential or simply no longer used ...
  3. Capital Asset

    A type of asset that is not easily sold in the regular course ...
  4. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  5. Capital Asset Pricing Model - CAPM

    A model that describes the relationship between risk and expected ...
  6. Chart Of Accounts

    A listing of each account a company owns, along with the account ...
RELATED FAQS
  1. What happens to the company stock if a subsidiary gets spun off?

    When a subsidiary gets spun off, the company's stock tends to drop. However, the investor in the stock does not lose any ... Read Full Answer >>
  2. What Book Value Of Equity Per Share (BVPS) ratio indicates a buy signal?

    Book value of equity per share (BVPS) is a ratio used in fundamental analysis to compare the amount of a company's shareholders' ... Read Full Answer >>
  3. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  4. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  5. Is there a way to include intangible assets in book-to-market ratio calculations?

    The book-to-market ratio is used in fundamental analysis to identify whether a company's securities are overvalued or undervalued. ... Read Full Answer >>
  6. What are some tactics businesses can use to increase unlevered free cash flow?

    Unlevered free cash flow is defined as earnings before interest taxes, depreciation and amortization (EBITDA) less capital ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    How To Decode A Company's Earnings Reports

    Read between the lines to decipher a company's true financial condition.
  2. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  3. Personal Finance

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  4. Personal Finance

    Top 8 Ways Companies Cook The Books

    Find out more about the fraudulent accounting methods some companies use to fool investors.
  5. Markets

    Cash: Can A Company Have Too Much?

    Cash is something companies love to have. But if they are not using it there could be problems.
  6. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  7. Economics

    Calculating Net Realizable Value

    An asset’s net realizable value is the amount a company should expect to receive once it sells or disposes of that asset, minus costs from its disposal.
  8. Stock Analysis

    3 Stocks To Buy and Hold For the Rest of 2015

    One of the dominant themes to consider for 2015 is the normalization of monetary policy as the Fed raises interest rates.
  9. Fundamental Analysis

    Are Fast-Casual Restaurants Overvalued?

    Can fast-casual restaurants actually grow to the levels that investors believe they can?
  10. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!