What are Core Earnings?
Core earnings are the net income a company generates from the principle products and services it provides.
How Do Core Earnings Work?
The concept of core earnings was developed by Standard & Poor's (S&P) in order to measure the income a company generates from its daily operations. In this respect, core earnings include income generated by a company's production operations, advertising campaigns and issuance of securities. Core earnings exclude such factors as gains from a firm's portfolio and pension plan, capital gains from asset sales and any income derived from a brief project.
To illustrate, suppose Company XYZ produces watches. Company XYZ's core earnings will derive from revenue generated by the process of manufacturing the watches, XYZ's effort to advertise the watches and the sale and servicing of the securities it issued to raise money to maintain watch-making operations.
Why Do Core Earnings Matter?
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.