Definition: Year-to-date (YTD) earnings represent the earnings of a firm between Jan 1 and the current date. YTD earnings are useful in determining the amount that is withheld for taxes on small businesses, and in determining the compliance of a firm with the lending policies of large financial institutions.
What Does Year-to-Date Earnings Mean?
What is the definition of year to date earnings? On an individual basis, year-to-date earnings is a great tax-planning tool that allows the comparison of current income to the income of the past year in the same period. Thus, it serves as a method to leveragespending and increase personal income.
Public companies have a legal obligation of reporting their year-to-date earnings on a quarterly or annual basis in their interim and annual financial statements. Although the YTD reports may differ between different companies, investors and financial analysts can analyze the financial ratios for a firm to determine its profitability, liquidity, leverage and asset management, among others.
Let’s look at an example.
Example
John works as an accountant at a retail company. He is asked to prepare a spreadsheet that calculates the year-to-date earnings of the company. The company is labor-intensive, thereby paying high wages for the workers in the production line. Furthermore, the company purchases raw materials at an average cost of $5,000 per month.
John creates the spreadsheet and notices that, although the company pays a lot of money in wages and raw materials, it has a net income of $10,500 at the end of September and $94,500 net income YTD. The net income of the month accounts for the 42% of the monthly revenues, whereas the YTD net income accounts for the 40.6% of the YTD revenues. The weights of the net income are in line, suggesting that the company manages its assets efficiently to generate profits. Furthermore, the advertising and accounting expenses are low, leaving room for a higher spending on wages and raw materials.
Summary Definition
Define Year-to-Date Earnings: YTD earnings means the cumulative company income from the start of the calendar year to the present date.
