How to Calculate Year-to-Date Earnings

Whether it's for your own personal income or that of a public company, calculating year-to-date earnings is handy analysis tool.

Sep 10, 2015 at 11:03PM

Now that we're more than halfway through the year, do you know how well your finances are progressing compared to last year? Do you know how much money your top investment has earned so far this year relative to how it did last year or the year before?

If not, it's time you took a closer look at year-to-date earnings and how it can improve your analysis of your personal finances and your investments.

What are year-to-date earnings?
Year-to-date earnings are simply the sum of earnings from the beginning of a given year to the present time. This calculation can be done at any time as long as there is available data.

In the case of your personal income, this can be done as frequently as you receive your pay stub. Most pay stubs have a running total of year-to-date earnings already calculated and included for you. This may be shown before or after any taxes or deductions.

If the calculation isn't provided for you, it's pretty easy to calculate on your own. All you need to do is take all of your pay stubs so far in a given year and add them up. You can do this using your gross income (before taxes) or your net income (after taxes). Or you could do it for both. It's up to you, just be consistent.

For public companies, you're most likely only going to be able to calculate year-to-date earnings on a quarterly basis. Public companies only disclose their financial statements quarterly, meaning you won't have the data to do the calculation more frequently than that.

Public companies generally disclose year-to-date results along with their results for a given quarter on both their income statement, balance sheet, and statement of cash flow. This is particularly helpful when analyzing ratios and other calculations that aren't as simple as just adding up the figures from prior quarters as you would do for revenue or net income, among others.

Why are year-to-date earnings useful?
For your personal finances, calculating year-to-date earnings is helpful both as a benchmark and as a tax-planning tool. Most people strive to get better each year, including increasing personal income. Calculating year-to-date earnings from time to time and comparing it with the same time in prior years is an effective way to gauge how your income has changed over time without having to wait a full year to see the data.

You can also use it to gauge your savings (year-to-date earnings compared to year-to-date savings), your spending (compare year-to-date earnings with your year-to-date budget), and more. Like, for example, your taxes.

If your income goes up and your tax withholdings stay constant, you can see that trend early enough to begin saving up for a potentially higher tax bill. If your income declines, the inverse may also be true. The only way you'll know is if you're tracking the numbers (and with the help of your personal accountant's advice).

In the investing world, comparing year-to-date earnings from one year to the next is the best way to tell how well a company is doing over time. It's critical to understand how a company is growing and evolving, and the only way to do that is to track its performance on a trend basis.

Is revenue growing? Are margins improving or shrinking? How are external market events affecting the business relative to previous economic cycles? The answers to these questions are pertinent to understanding how a company has handled itself in the past, and they're indicative of what may happen in the future. Using prior years and trends is the only way to know.

It pays to compare apples to apples
The core of why year-to-date earnings are an important calculation is that it allows you to compare earnings or other metrics over the same period from year to year. Comparing how a company performed over the entire year last year with just six months this year doesn't make sense. That's apples and oranges.

Using year-to-date earnings allows you to compare the performance so far this year with the same period of time in years past. That's apples to apples, and for both your personal finances and your investing that's a valuable analysis tool.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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