Look-Through Earnings

DEFINITION of 'Look-Through Earnings'

Look-through earnings include the profits that a company pays to its shareholders in the form of dividends and the retained earnings that the company uses to expand its operations. This concept was popularized by Warren Buffet to analyze the overall earnings-generating capabilities of the firm. The idea is that all of these profits have value to investors - the dividends provide an immediate benefit, while the retained earnings should increase the stock's value in the future.

BREAKING DOWN 'Look-Through Earnings'

The investor should consider all of these profits - the look-through earnings - in assessing the value of a stock. Look-through earnings also account for the taxes that would have been paid if the retained earnings had been distributed as dividends.

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  2. Appropriated Retained Earnings

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  3. Dividend

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RELATED FAQS
  1. How do you calculate retained earnings per share?

    Research the amount of retained earnings per share compared over time to understand whether or not a company uses its profits ... Read Answer >>
  2. How are retained earnings related to a company's income statement?

    Understand what a company's statement of retained earnings represents and how it is related to a company's other financial ... Read Answer >>
  3. How do dividends affect retained earnings?

    Find out how distribution of dividends affects a company's retained earnings, including the difference between cash dividends ... Read Answer >>
  4. Which transactions affect the retained earnings statement?

    Retained earnings are the portion of a company's income that management retains for internal operations instead of paying ... Read Answer >>
  5. How is revenue related to retained earnings?

    Learn what business revenue is and how it relates to retained earnings. See how accountants calculate these key figures and ... Read Answer >>
  6. Can a company declare a dividend that exceeds its earnings per share?

    Yes, it can. In fact, many well-known Fortune 500 companies have paid dividends in years where they posted negative earnings ... Read Answer >>
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