Bookmark These: How to navigate earnings season
By Reid Kanaley
http://www.JewishWorldReview.com | (MCT) The quarterly-earnings season launched this week with Alcoa Inc.'s report Monday. If your money's in stocks, you should know how the companies are doing. Here's how to follow the numbers.
—Watch year-over-year: VisionWiz, a site about Internet start-ups and tech-company finances, outlines the basics of corporate earnings, including the importance of comparing a firm's latest quarter with the corresponding period a year earlier. These year-over-year results provide more of an apples-to-apples evaluation than comparing consecutive quarters. The net profit or net loss is a company's bottom line, and this posting tells you how to find it in all the paperwork. http://is.gd/xNlzTa
—Estimating estimates: Investopedia makes some useful points about what are called earnings estimates. Wall Street analysts make a living on their best guesses about how well, or poorly, a company should be doing. Companies' share prices can jump or slump solely based on whether they beat or fall short of those guesses. "As a general rule, companies with earnings that are predictable are easier to assess and are often better investments," says the author and consultant, Ben McClure. http://is.gd/yH2VNg
—Creative accounting: The CFA Institute, a group for investment professionals, provides cautionary detail about the games companies can play with their financial numbers. Called "Smooth Move: The Manipulation of Earnings," the article says, in part, "Simply stated, accounting rules allow management to create various accounts and reserves on a company's financial statements that can then be used to 'smooth' the quarterly earnings number reported to investors." http://is.gd/NTc8M0
—The CEO's call: Most big companies, and many small ones, hold conference calls to explain earnings reports. You can usually listen in. Yahoo Finance provides a daily listing and links to earnings calls from this website. You can also look ahead to see what's coming up, or look back and listen to archived calls. http://biz.yahoo.com/cc
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