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Earnings refers to a general term describing a company’s net income.  It is usually expressed for a specific period such as a three-month quarter or for the fiscal year. 

Earnings is one of the most important numbers for a for-profit company because, by definition, the company’s purpose is to maximize earnings which leads to maximizing value for the owners.

For corporations, earnings are expressed in a couple of different ways.  EBIT is earnings before interest and taxes.  EBITDA is earnings before interest, taxes, depreciation and amortization. 

Investors closely watch earnings and compare the actual earnings to management’s prior estimates of those earnings.  Share prices usually go up if the actual earnings are more than the estimate and go down if the actual earnings are less than the estimate.

Because of market pressures to continually grow earnings, some critics claim that management will forego decisions that are in the company’s best, long-term interest because the costs associated will decrease the current earnings numbers.  

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