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Investment: An A-Z Guide by Philip Ryland

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E

Earnings

The proportion of a company’s profits which belongs to the shareholders and, therefore, a key figure in many share valuation yardsticks. Because they are a key figure, earnings are subject to much accountancy fudging. They are generally expressed on a per share basis and are calculated by dividing a company’s weighted average number of shares outstanding for an accounting period into its profits after deductions for taxation, profits belonging to outside shareholders (minorities), extraordinary items and dividends to preference shareholders. Earnings come in several formats:

Basic earnings. The figure shown by the company in the regular results statements that it is required to make.

Underlying earnings. The figure that ...

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