BASIC EARNINGS POWER Definition

BASIC EARNINGS POWER (BEP) is useful for comparing firms in different tax situations and with different degrees of financial leverage. This ratio is often used as a measure of the effectiveness of operations. Basic Earning Power measures the basic profitability of Assets because it excludes consideration of interest and tax. This ratio should be examined in conjunction with turnover ratios to help pinpoint potential problems regarding asset management. Formula: EBIT / Total Assets

Learn new Accounting Terms

WAGE is actual remuneration paid to an employee for services rendered. Minimum wages, in the U.S.A., are established by the federal Fair Labor Standards Act.

ISSUE, in securities, is stock or bonds sold by a corporation or a government; or, the selling of new securities by a corporation or government through an underwriter or private placement.

Suggest a Term