Net earnings are the net incomes which get after deducting all operating expense, interest and dividend from net sales. Actually, if are just providing service and there is no expense, then whole earning will be net earnings. But it is impossible because for doing business, we have to pay operating, administrative and financial expenses. So, we deduct all these expenses from sales and we get net earning or net profit.
If we make profit and loss account or income statement, we can easily calculate net earnings. In the right side of profit and loss account, we show net sales and other earnings like commission, fees etc. In left side, we show cost of goods sold, operative expenses, interest cost and tax. Difference of this will be either net earnings or net loss.
To calculate net earning is so important for shareholders because shareholders have right to get the share in net earnings. So, all the shareholders are interested to know how much net earnings company has earned during different period. Some big MNC have started to show quarterly reports of their performance.
For example : Google has shared its second quarter earnings result announcing consolidated revenue of $15.96 billion, up 22% since Q2 2013, earnings per share of $4.99, and net income of $3.42 billion.
Lots of accounting ratios are dependent on net earnings like earning per share , profit margin and profitability ratios.
If we make profit and loss account or income statement, we can easily calculate net earnings. In the right side of profit and loss account, we show net sales and other earnings like commission, fees etc. In left side, we show cost of goods sold, operative expenses, interest cost and tax. Difference of this will be either net earnings or net loss.
To calculate net earning is so important for shareholders because shareholders have right to get the share in net earnings. So, all the shareholders are interested to know how much net earnings company has earned during different period. Some big MNC have started to show quarterly reports of their performance.
For example : Google has shared its second quarter earnings result announcing consolidated revenue of $15.96 billion, up 22% since Q2 2013, earnings per share of $4.99, and net income of $3.42 billion.
Lots of accounting ratios are dependent on net earnings like earning per share , profit margin and profitability ratios.
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