Earnings
Earnings in CORE means net income, the bottom line. It's not EBITDA and it's not operating income, even though people on board calls say "earnings" when they mean adjusted EBITDA.
Earnings are what's left after every expense, including interest and taxes:
Walk it down the income statement
Say your company has 400,000 of COGS, 20,000 of interest and $50,000 of taxes.
| Line | Amount |
|---|---|
| Revenue | $1,000,000 |
| - COGS | $400,000 |
| = Gross profit | $600,000 |
| - OPEX | $300,000 |
| = Operating income | $300,000 |
| - Interest | $20,000 |
| = Pre-tax income | $280,000 |
| - Taxes | $50,000 |
| = Net income (Earnings) | $230,000 |
Net income is $230,000. That's a net margin of 23%.
What goes in each line
- Revenue is what you earned from customers in the period. That's recognized revenue.
- COGS is what it cost to deliver the product. See COGS.
- OPEX is R&D, sales and marketing, and G&A. See OPEX.
- Interest is what you pay on debt, minus any interest income. A startup with cash in the bank and little debt can earn more interest than it pays. Then this line is negative and it adds to earnings.
- Taxes are income tax, worked out on pre-tax income. A company losing money usually pays little or none.
Look one line up
You don't control interest or taxes. If you want to know how well the business runs, look at operating income and Operating Margin.
Earnings aren't cash
Net income is an accounting number. A profitable company can still run short of cash. Customers pay late. You buy equipment. You pay down debt. If the question is about cash, open the cash flow statement.