What To Look For in Quarterly Results

12 Oct

Quarterly results are essential to understand if you’re planning on investing in the stock market. Why? They tell us how a company is doing—whether they are profitable, what their revenues are, and what expenses they have. It helps us know whether or not it would be a good idea to keep investing—or start investing—in the company.

 

Remember those quarterly report cards back in primary and secondary school? Or perhaps your school used “progress reports.” Either way, those reports—which you may have dreaded bringing home to your parents to be signed—showed our progress and gave our teachers and parents an idea of how we were doing. An “A” meant we were at the top of our game, a “B” said we were doing pretty darn good, a “C” put us in the average group, and a “D” or “F” usually indicated you’d soon be in serious doo-doo.

 

Well, quarterly earning results fill the same function—just for businesses instead of individuals. Quarterly reports are generally filed in January, April, July, and October. Reports are filed on paper, as well as often presented and discussed aloud by CEOs such as Ray McDaniels of Moody’s.

 

So, what should you look for when reading results? Here are the most important things to take from a report:

 

  1. Compare the present quarter’s earnings with the corresponding quarter the previous year
  2. Find the gross revenue, or the total revenue brought in by the company
  3. Determine the operating income, or the profit, by subtracting expenses from the gross revenue
  4. Look for the net profit, or “bottom line,” which will tell you what is distributed to shareholders after loan repayments and tax expenses
  5. Other income gives you information about sources of income outside of core business, including interest and investments

 

Remember, this is just a basic definition of what to look for in a quarterly report. If you’re planning on investing heavily in the stock market, it’s a good idea to get professional advice to be sure you’re putting your money to good use.

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