Accumulated Earnings and Profits

  

Gillette has done just fine selling razors. The company has little debt, tons of cash, pays a dividend, and over time has accumulated billions in after-tax earnings, lovingly referred to as profits.

Earnings and profits, notably, are not retained earnings. E&P is all about cash liquidity and things like Gillette's ability to buy other companies, like those making razors with creative places to shave (we mean outdoors, or on an airplane, obviously; we're a G-rated site), and/or distribute dividends to shareholders.

Related or Semi-related Video

Finance: What is Earnings Per Share (EPS...33 Views

00:00

finance a la shmoop what is earnings per share or EPS? okay you know the lemonade

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stand the one with 20 grand in sales and 16 grand in gross profits and yeah will [Balance sheet for Lemonade Stands R Us appears]

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spare you the gross jokes you know the customer asks lemonade.. what the fly

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was doing in his lemonade and yes of course she said the backstroke what else

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would you expect from the people at Schmo really?

00:26

so after gross profits there were operating expenses like those and then

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operating profits down here that 7,500 thing then there were taxes and yeah

00:37

there are always taxes we can grumble about and then finally net income aka [Net income appears on balance sheet]

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earnings but then below earnings you'll see that there are a hundred shares in

00:47

this little company the founder owns 60 of them mom owns 10 the new stepdad owns

00:53

20 he was guilted into it by you know the divorce lawyer and Enrique the

00:57

gardener for some reason who has cleverly weaseled his way into the

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families arts and minds owns the last 10 its annual report time and the investors

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want to know what their earnings per share were so that they can all compare

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relative performance on their investments right so the total earnings

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of the company in this example was five thousand two hundred fifty bucks which

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means that the earnings per share of our little lemonade stand company here or

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that 5,250 figure divided by a hundred or 52.50 a share that's [EPS formula appears]

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what each share earned if you divvy the company into a hundred little pie slices

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or parts so yeah earnings per share equals earnings per slice o pie or wait

01:43

lemonade pie has that been done yet time for a new business venture what do you [A plate of lemonade pie appears]

01:47

think we're taking investors just call us please

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