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Earning Potential

What is 'Earning Potential'

The possible upside of the earnings that could be generated for each share outstanding of a particular stock. Earning potential reflects the largest possible profit that a corporation can make. It is often passed on to investors in the form of dividends. Greater earning potential drives up the price of a stock.

Explaining 'Earning Potential'

Although earning potential can cause a stock's price to rise, it will not necessarily translate into higher current dividends. A company that comes out with an innovative new product may have higher earning potential in the future, but the projected revenue may not translate into actual profit for some time.


Further Reading


Trends in park tourism: Economics, finance and management
www.tandfonline.com [PDF]
… These figures from the USA show state parks earning higher percentages of their budgets from … Generally the trend is for government to demand that parks earn much higher amounts of their … to many business people in tourism that substantial income can be earned by providing …

Economic value added, future accounting earnings, and financial analysts' earnings per share forecastsEconomic value added, future accounting earnings, and financial analysts' earnings per share forecasts
link.springer.com [PDF]
… These figures from the USA show state parks earning higher percentages of their budgets from … Generally the trend is for government to demand that parks earn much higher amounts of their … to many business people in tourism that substantial income can be earned by providing …

The economic implications of corporate financial reportingThe economic implications of corporate financial reporting
www.sciencedirect.com [PDF]
… These figures from the USA show state parks earning higher percentages of their budgets from … Generally the trend is for government to demand that parks earn much higher amounts of their … to many business people in tourism that substantial income can be earned by providing …

The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative?The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative?
www.sciencedirect.com [PDF]
… These figures from the USA show state parks earning higher percentages of their budgets from … Generally the trend is for government to demand that parks earn much higher amounts of their … to many business people in tourism that substantial income can be earned by providing …

Earnings management and earnings qualityEarnings management and earnings quality
www.sciencedirect.com [PDF]
… These figures from the USA show state parks earning higher percentages of their budgets from … Generally the trend is for government to demand that parks earn much higher amounts of their … to many business people in tourism that substantial income can be earned by providing …

Earnings management under German GAAP versus IFRSEarnings management under German GAAP versus IFRS
www.tandfonline.com [PDF]
… These figures from the USA show state parks earning higher percentages of their budgets from … Generally the trend is for government to demand that parks earn much higher amounts of their … to many business people in tourism that substantial income can be earned by providing …

Financial analysts' forecasts of earnings: A better surrogate for market expectationsFinancial analysts' forecasts of earnings: A better surrogate for market expectations
www.sciencedirect.com [PDF]
… These figures from the USA show state parks earning higher percentages of their budgets from … Generally the trend is for government to demand that parks earn much higher amounts of their … to many business people in tourism that substantial income can be earned by providing …

Choice of auditors and earnings management during the Asian financial crisisChoice of auditors and earnings management during the Asian financial crisis
www.emerald.com [PDF]
… These figures from the USA show state parks earning higher percentages of their budgets from … Generally the trend is for government to demand that parks earn much higher amounts of their … to many business people in tourism that substantial income can be earned by providing …

Earnings management and audit quality in Europe: Evidence from the private client segment marketEarnings management and audit quality in Europe: Evidence from the private client segment market
www.tandfonline.com [PDF]
… These figures from the USA show state parks earning higher percentages of their budgets from … Generally the trend is for government to demand that parks earn much higher amounts of their … to many business people in tourism that substantial income can be earned by providing …



Q&A About Earning Potential


What does income represent for households and individuals?

For households and individuals, "income is the sum of all wages, salaries, profits, interests payments, rents, and other forms of earnings received in a given period of time." (also known as gross income). Net income is defined as the gross income minus taxes and other deductions (e.g., mandatory pension contributions), and is usually the basis to calculate how much income tax is owed.

What is the possible upside of the earnings that could be generated for each share outstanding?

The possible upside of the earnings that could be generated for each share outstanding.

What is income?

Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms.

What are dividends?

Dividends are payments made by companies to their shareholders.

What do economists use to measure national economic performance?

Gross domestic product (GDP) measures national economic performance.

How can you define net income for a firm?

Net income nets out expenses

What can higher earning potential do to a company's future revenue?

Higher earning potential can cause a company's projected revenue to not translate into actual profit for some time.

How does earning potential affect a stock's price?

Higher earning potential drives up the price of a stock.