Cash earnings definition

What are Cash Earnings?

Cash earnings are the residual profits after cash expenses are subtracted from cash revenues. The expenses used in the calculation do not include any non-cash expenses, such as amortization and depreciation. An analyst may want to calculate this number from a company’s reported financial statements, as part of an analysis of a business.

How to Calculate Cash Earnings

There are two ways to calculate cash earnings. As just noted, you can subtract cash expense from cash revenues. This approach works well when a business is issuing financial statements under the cash basis of accounting. Another option is to start with the net income figure reported under the accrual basis of accounting, and then subtract out non-cash income and add back non-cash expenses. The formula is as follows:

Net income - Non-cash income + Non-cash expenses = Cash earnings