the merger agreement. Earned income Compensation earned from employment, which includes wages, salary, tips, and compensation. Earned income credit A tax credit for taxpayers with children. Earned surplus See: Retained earnings Earnest money Money given to a seller by a buyer to demonstrate the buyer's good faith. If the deal falls through, the deposit is usually forfeited. Earning asset An asset that generates income, e.g., income from rental property. Earning power Earnings before interest and taxes (EBIT) divided by total assets. Earnings Net income for the company during a period. Earnings before interest after taxes (EBIAT) A financial measure defined as revenues less cost of goods sold and selling, general and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest plus cashincome taxes. Equivalent to EBIT minus cash taxes. Earnings before interest and, taxes (EBIT) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Earnings before interest, taxes, and depreciation (EBITD) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciationexpenses are not included in the costs. Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation and amortization expenses are not included in the costs. Earnings before taxes (EBT) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of income taxes. Earnings momentum An increase in the earnings per share growth rate from one reporting period to the next. Earnings per share (EPS) A company'sprofit divided by its number of common outstanding shares. If a company earning $2 million in one year had 2 million common shares of stockoutstanding, its EPS would be $1 per share. In calculating EPS, the company often uses a weighted average of shares outstanding over the reporting term. The one-year (historical or trailing) EPS growth rate is calculated as the percentage change in earnings per share. The prospective EPS growth rate is calculated as the percentage change in this year's earnings and the consensus forecast earnings for next year. Earnings-price ratio See: Earnings yield Earnings response coefficient A measure of relation of stock returns to earnings surprises around the time of corporate earnings announcements. Earnings retention ratio Plowback rate. Earnings surprises Positive or negative differences from the consensus forecast of earnings by institutions such as First Call or IBES. Negative earnings surprises generally have a greater adverse effect on stockprices than a reciprocal positive earnings surprise. Earnings yield The ratio of earnings per share, after allowing for tax and interest payments on fixed interest debt, to the current share price. The inverse of the price-earnings ratio.