Earning power means the normal level of income to be obtained in the future. Earning power differs from actual net income by the amount of irregular revenues, expenses, gains, and losses. Users are interested in earning power because it helps them derive an estimate of future earnings without the “noise” of irregular items.
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Receivables refer to amounts due from individuals and other companies. Receivables are claims that are expected to be collected in cash.
- Raw materials
Raw materials are the basic goods that will be used in production but have not yet been placed into production.
- Classified balance sheet
Classified balance sheet is a balance sheet that contains a number of standard classifications or sections. A classified balance sheet categorizes assets as current assets...
- Accrued expenses
Expenses incurred but not yet paid or recorded at the statement date are accrued expenses. Interest, rent, taxes, and salaries are typical accrued expenses.
- Market interest rate
Market interest rate is the rate investors demand for loaning funds to the corporation.
- Average collection period
Average collection period means the average amount of time that a receivable is outstanding; calculated by dividing 365 days by the accounts receivables turnover ratio.
- Operations costing
Operations costing is a combination of a process cost and a job order cost system in which products are manufactured primarily by standardized methods, with some customization.