Corporate earnings are a crucial measure of a company’s profitability and growth potential. Companies use them to reinvest in their business, pass them onto shareholders as dividend payments, or both. Over time, these surpluses help to drive economic growth and create wealth for investors.
In its simplest form, corporate earnings are top-line revenue minus company expenses. However, there are many different ways to calculate and present earnings results, which can lead to misleading conclusions. For example, one-time events like the sale of a division or asset write-downs can inflate or deflate earnings and make a company seem more profitable than it is. A better way to evaluate earnings growth is to look at adjusted earnings, which excludes these one-time gains and losses. Other important indicators include cash flow and comparable same-store sales for retail and restaurant chains.
Despite their complexity, corporate earnings are the most critical data point that public companies report on a quarterly basis. Investors, analysts and news outlets rely on them to make informed decisions about stocks. They also play a critical role in setting expectations for future economic trends.
The BEA provides corporate profit data to inform Congress, policymakers, and business and community leaders about economic trends in the United States. We publish the data to provide transparency into how American businesses are generating and using profits, as well as their capacity to meet national objectives. The data also supports analysis of the impact of federal tax and spending policies on business, investment, and productivity.