| The annual profits (revenues less cost of sales and operating expenses) of a company after deduction of tax, dividends to preference shareholders and bondholders. Earnings are important as they indicate the potential for growth, share price appreciation and future dividends payments. Earnings are usually expressed on a per-share basis (e.g. 7p), and the earnings per share (EPS) figure is calculated by dividing total earnings by the average number of shares in issue for the relevant accounting period. For example, earnings of œ2m, with 10m shares in issue would give an EPS of 20p. Earnings, which can be referred to as income, come in several forms: reported earnings (the figure in the company's accounts), underlying earnings (the figure excluding any one-off items such as the sale of land that is not part of the company's normal business), diluted earnings (earnings after adjustment has been made for shares that may be issued in the future if holders of options, warrants and convertibles choose to exercise their rights).
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