Gross Earnings
Candlefocus EditorGross earnings of individuals and households are distinct from adjusted gross income (AGI). AGI is what is left after certain deductions are taken out from above-the-line deductions, such as IRA contributions, moving costs and student loan interest. These deductions reduce the amount of taxable income from your gross pay. This is important when filing taxes, as the amount of taxes you owe is typically calculated based on your AGI.
When it comes to companies, gross earnings are an important metric for measuring success. It is the total income generated in a business before making any internal or external payments, including cost of goods sold, tax, loan payments and dividend payments. The excess earnings are known as net earnings. It is often used in assessing the financial performance of a business.
Gross pay, AGI and net earnings are obviously all important when looking at a company’s financials, but understanding the distinction between each is essential in ensuring accurate assessment and reporting of a business’s financial health. Knowing the right amount of deductions to apply helps business owners to remain profitable, while understanding AGI is useful when filing taxes. Gross earnings are the most comprehensive financial figure to consider when performing an analysis of a company’s performance. As such, it is important to understand the various aspects of this metric in order to gain an accurate assessment of a business’s financial health.