Owner Earnings Run Rate

DEFINITION of 'Owner Earnings Run Rate'

An extrapolated estimate of an owner's earnings (free cash flow) over a defined period of time (typically a year). This assumes that the firm's financial performance stays consistent throughout the period. Therefore, this estimate can be difficult to assess if the firm is operating in a business that experiences seasonality, because owner earnings from one period may not be applicable across the entire time period.

BREAKING DOWN 'Owner Earnings Run Rate'

For example, after three quarters of performance, the company's owner earnings is $9 million. Assuming that performance stays consistent, the company's owner earnings run rate for the fiscal year would be $12 million ($3 million per quarter).

Owner earnings is often an important metric that investor's can use to gauge a firm's financial health. Increased owner earnings tend to act as a signal that a company's subsequent earnings will be good. Therefore, assessing an accurate owner earnings run rate could be very important in predicting the company's longer term performance.

RELATED TERMS
  1. Earnings Estimate

    An analyst's estimate for a company's future quarterly or annual ...
  2. Run Rate

    1. How the financial performance of a company would look if you ...
  3. Entity-Purchase Agreement

    A type of business succession plan that is used by companies ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. ...
  5. Earnings Season

    The months of the year in which a majority of quarterly corporate ...
  6. Accounting Earnings

    The amount of money a company has earned during a given period, ...
Related Articles
  1. Markets

    What are Earnings?

    The amount of profit that a company produces during a specific period, which is usually defined as a quarter (three calendar months) or a year.
  2. Entrepreneurship & Small Business

    5 Reasons Small Business Owners Sell Their Companies

    Selling a business you've built from scratch isn't done lightly. Consider these moments when the opportunity might be right for you.
  3. Managing Wealth

    How to Use Earnings Season to Make Better Decisions

    Earnings season reflects the state of the stock market, but also demonstrates how the overall economy is performing.
  4. Investing

    4 Management Tips for a Seasonal Business Owner

    Learn about ways for business owners running seasonal businesses to ensure the lives of their businesses and promote success through the off-season.
  5. Investing

    Earnings Forecasts: A Primer

    Learn how this key metric is calculated and how it is used to judge market performance.
  6. Markets

    IBM Stock: An Earnings Case Study

    Learn the main drivers behind IBM's earnings model and why analysts predict a decline in 2016 followed by a strong recovery in 2017.
  7. Personal Finance

    Everything Investors Need To Know About Earnings

    We go over the concepts behind the excitement over the most important figure in the stock market.
  8. Managing Wealth

    Finding The Best Buyer For Your Small Business

    Learn more about the process business owners go through to seal a merger or acquisition deal.
  9. Managing Wealth

    Why Successful Business Owners Sell Out

    Learn the motives that drive companies into the arms of an acquirer.
  10. Financial Advisor

    How to Ready Your Advisory Practice for Sale

    Advisors who plan to sell their practice need to consider these steps in advance.
RELATED FAQS
  1. When do I need to project run rates for my business?

    Learn some of the reasons why businesses project run rates; discover why companies rely on such a simple metric and how it ... Read Answer >>
  2. When is earnings season?

    Earnings season is the period of time during which a large number of publicly traded companies release their quarterly earning ... Read Answer >>
  3. What happens if a company's earnings fall short of estimates?

    Understand what it means when a company "misses earnings" and does not live up to consensus estimates, and learn why most ... Read Answer >>
  4. What can I learn about a company by studying its earnings report?

    Find out how to review an earnings report by looking for key information about cash flow and margins, and discover the importance ... Read Answer >>
  5. What is earnings management?

    Before diving into what earnings management is, it is important to have a solid understanding of what we mean when we refer ... Read Answer >>
  6. Is maximizing stock price the same thing as maximizing profit?

    Simply put: yes. A company's stock price will factor in many different variables including the type of industry the firm ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center