Explanation of Net Earnings:
Also called Net Income, Net Profit, or informally The Bottom Line, Net
Earnings is listed on the Income Statement. This is
the company's profit after all expenses are subtracted from the company's
Net Sales.
Importance of Net Earnings:
Since the Net Earnings is what the company is able to keep for itself after all
the expenses are paid, this is a value that always needs to be watched
closely. A consistently decreasing Net Earnings is a sign the company is
having an increasingly hard time doing business profitably. If the Net
Earnings increased or decreased sharply, you may have to investigate as to what
cause this change. Often acquisitions or one-time charges are to blame
for a radically changing Net Earnings. In extreme cases, the Net Earnings
may even be negative, meaning the company is losing money while doing
business. Net Earnings is important to the calculation of key performance
ratios like Net Profit Margin, Return on Assets, and Return on Equity.
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