Net Earnings Defined

What are Net Earnings and how do you calculate net earnings?  If you are just learning how to invest in stocks, understanding net earnings and how to calculate net earnings is an important aspect of investing and how to invest in the stock market for beginners.  Net earnings, of course, are the grand total of all earnings and ultimately what investors are seeking when they acquire a stock to invest in.

Net earnings are the accumulation of all earnings from total revenues less any costs incurred in accumulating those revenues.

Getting to Net Earnings

Getting to net earnings, mathematically, is simple to calculate.  First, there are total revenues.  Then, from total revenues an individual would deduct all costs associated with the accumulation of total revenues.

Costs incurred for a company are found on the financial statements.  There are three distinct areas that total costs are accumulated:

  • Cost of Goods Sold (COGS)
  • Total Operating Costs
  • Continuing Costs

A firm breaks down the three areas of these costs and deducts these singularly down the financial statement.

Examples of Net Earnings

For instance, this

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