Earning potential refers to the amount of return an investment can produce or the amount of money an individual can earn from a business transaction or career. Evaluating income potential is important for investors to make informed decisions, and education and training can increase lifetime earning potential.
Earning potential is a term that is often used in two types of applications. When it comes to investments, income potential has to do with the amount of return that a given security can reasonably be anticipated to produce within a specified period of time. The term is also often used to identify the amount of money an individual can earn from a specific business transaction or during their years as a member of the workforce.
In terms of investment choice, evaluating income potential is very important to investors. The process involves understanding the history of that investment and what factors occurred that led to the current value of that particular security. As part of the evaluation process, an investor will consider upcoming events or trends that may influence the future movement of that security’s unit price, and determine whether the potential short-term or long-term return is sufficient to warrant buying or selling that asset. . Once the investor has a good idea of the income potential associated with that security, it is much easier to make an informed decision about how to proceed.
Earning potential is often an important consideration when choosing to enter a particular career field, or accept a specific job position within that field. People often take a close look at how much can be earned over the years, determining whether the monetary return is enough to justify any liabilities that may be associated with a given career path. Along with the desire for personal fulfillment within a career, earning potential is often one of the factors that can convince or discourage a person from choosing to pursue a particular career or work option.
As part of preparing to increase lifetime earning potential, educators will often counsel students for degrees or technical training that will increase earning potential. People who hold specialized degrees in certain areas are more likely to earn more during their lifetimes than those who do not choose to continue their education by enrolling in a college or university and successfully completing a degree program. Likewise, people who successfully secure training at a technical school are likely to earn more over the years than people who don’t pursue any type of training above the high school level. Today, participation in continuing education opportunities throughout the working years is also seen as a means of increasing value to employers and therefore increasing earning potential.
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