What are Earnings?

Earnings refers to the overall financial gains of a company, often focusing on specific levels of profitability (e.g., gross earnings, operating earnings, or net earnings). It's a broader term used in various contexts, especially when discussing financial reports.

What is Profit?

Profit specifically indicates the surplus remaining after all expenses are deducted from revenue. It's more narrowly focused and is often considered synonymous with net earnings.

Comparing Earnings and Profit

Earnings and profits are generally considered to mean the same thing, which is a representation of the financial performance of a business. As such, they are frequently used interchangeably. However there are some differences between these terms.

The main difference is that profit is more commonly used in the income statement, where it can refer to gross profit, operating profit, and net profit. Gross profit refers to sales minus the cost of goods sold, while operating profit subtracts operating expenses from gross profit, and net profit subtracts all other expenses from operating profit. When someone refers to the profit of a business, they are generally referring to its net profit.

Conversely, earnings generally refers to the net profit of a business, and so is only positioned at the bottom of the income statement. It is also incorporated into the concept of earnings per share, where the net profits of a publicly-held company are divided by the number of shares outstanding to arrive at an earnings per share figure. This amount is then reported to shareholders.