This Site Requires Javascript
Burger Menu

Earnings Multiplier

Earnings Multiplier

What is the 'Earnings Multiplier'

The earnings multiplier is an adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used to discount future earnings, and allows investors to compare expected growth to an amount of money invested over the same period at current rates.

Explaining 'Earnings Multiplier'

The earnings multiplier is similar to a discounted cash flow in that future earnings are rolled back to determine how much they are worth in today's dollars. Investors use the earnings multiplier to figure out how much a company is worth, today, based on how it is expected to grow in the future.


Further Reading

Financial statement information and the pricing of earnings changesFinancial statement information and the pricing of earnings changes
www.jstor.org [PDF]
… and Washington Conference, 1994 Stanford Summer Research Conference, 1994 Mitsui Financial Economics and Accounting … many working capital accruals are common to both financial accounting and … earnings is predicted to be negatively related to the earnings multiplier …

1979 Competitive Manuscript Award: Valuation of Earnings Components in the Electric Utility Industry1979 Competitive Manuscript Award: Valuation of Earnings Components in the Electric Utility Industry
www.jstor.org [PDF]
… and Washington Conference, 1994 Stanford Summer Research Conference, 1994 Mitsui Financial Economics and Accounting … many working capital accruals are common to both financial accounting and … earnings is predicted to be negatively related to the earnings multiplier …

Fundamental analysis models in financial markets–Review studyFundamental analysis models in financial markets–Review study
www.sciencedirect.com [PDF]
… and Washington Conference, 1994 Stanford Summer Research Conference, 1994 Mitsui Financial Economics and Accounting … many working capital accruals are common to both financial accounting and … earnings is predicted to be negatively related to the earnings multiplier …

The ability of EVA (Economic Value Added) attributes in predicting company performanceThe ability of EVA (Economic Value Added) attributes in predicting company performance
academicjournals.org [PDF]
… and Washington Conference, 1994 Stanford Summer Research Conference, 1994 Mitsui Financial Economics and Accounting … many working capital accruals are common to both financial accounting and … earnings is predicted to be negatively related to the earnings multiplier …

A theory of price-earnings ratiosA theory of price-earnings ratios
www.tandfonline.com [PDF]
… and Washington Conference, 1994 Stanford Summer Research Conference, 1994 Mitsui Financial Economics and Accounting … many working capital accruals are common to both financial accounting and … earnings is predicted to be negatively related to the earnings multiplier …

The economics of earnings manipulation and managerial compensationThe economics of earnings manipulation and managerial compensation
onlinelibrary.wiley.com [PDF]
… and Washington Conference, 1994 Stanford Summer Research Conference, 1994 Mitsui Financial Economics and Accounting … many working capital accruals are common to both financial accounting and … earnings is predicted to be negatively related to the earnings multiplier …


Tags

earnings, multiplier, finance, price, share, economic, ratio, economics, income, stock, model, multipliers, market, business, effect, spending, total, valuation, increase, change, financial, formula, definition, money, test, investment, company, analysis, multiple, taxes, investors, government, employment, amount, concept, impact, terms, interest, million, level, multiples, effects, economy, research, capital
Section 508

WCAG 2.0

Section 508