The financial world has developed a special investment-oriented language to help describe the stock market, investments, securities for the stock market, stock market analysis, and its conditions. At times you may be confronted with a term which is totally alien or has a completely different meaning from what you thought. Misunderstanding these terms can sometimes lead to the wrong conclusion, and that can cost you money!

What you don't know can hurt you.

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Earnings Another word for profit, or net income, in this case the sum of the trailing four quarters' net income from continuing operations and discontinued operations. Since many investors use earnings reports to make their investment decisions, there is an unfortunate tendency for companies to try to put a positive ""spin"" on their earnings reports by whatever methods necessary. Investors need to understand the different types of earnings presentations to get a clear picture of a company's financials. There are three types of earnings often presented: 1.    Actual earnings. What a company earned including all current revenue and expenses. 2.    Operating earnings. Includes only revenue and costs from on-going operations. Excludes one-time non-operational charges such as gains or losses on sales of assets or one-time acquisition costs. Inventory write-downs and currency impacts are to be included in operating earnings (though the market often views them as special). 3.    Pro-forma earnings. Compares current quarter costs and losses against similar accounting practices and similar categories from the prior period. Excludes revenue and costs from operations that were not in the comparable quarter.   Earnings Estimates Analysts' estimates for earnings per share from continuing operations, adjusted to exclude extraordinary items. Quarter and Fiscal Year EPS Estimates are what analysts expect the company to earn per share for the next fiscal quarter or year. Compared with earnings for the year-ago period, this is a useful indicator not only of the company's ability to turn a profit, but of how fast it is growing   Earnings Growth The percent change in earnings projected for a company over some given period. Growth rates for the fiscal year following the current fiscal year are calculated as the percent change between the estimate for the current year and estimate for the following year   Earnings Per Share (EPS) Net income divided by common shares outstanding. A company that earns Rs.1 million for the year and has a million shares outstanding has an EPS of $1. This EPS figure, which represents how much of earnings each share is entitled to, is important as the basis for various calculations an investor might make in assessing a stock's priciness. The most widely used indicator of whether a stock is over- or undervalued, for example, is the price/earnings (P/E) ratio, which relates share price to earnings per share.   Earnings Surprise The difference between what analysts expected a company to earn and what was actually earned. Earnings estimates have gained importance in recent years, and companies that don't measure up often find their shares hammered. (The difference can also be expressed as a percentage.)