At the end of every quarter of the year, publicly traded companies are required to file reports with the Security and Exchange Commission (the SEC) containing information about their economic status. Usually, a company also will issue a press release at the same time, called an earnings report, which provides some basic financial information about the company, although this is not an SEC requirement.
The SEC Q-10 vs Earnings Reports
The filing requirement from the SEC includes a report known as a Form 10-Q that contains detailed information on the company’s performance during the prior quarter of the year and other useful information for investors. It must be filed within 45 days of the end of the quarter and is available to the public, although you might find it long, complicated and overly exhaustive. After the end of the fourth quarter, the end of the year, companies also must file an annual report with the SEC called a 10-K. These filing requirements have been in place since the 1970s.
What Are Quarterly Earnings Report?
Quarterly earnings reports are reports in the form of press releases made by public companies in conjunction with their 10-Q filings to give the general public information on their performance in the prior quarter. Earnings reports typically include basic financial information such as the company’s net income and its sales. They also provide the company the opportunity to forecast their expectations for future sales, earnings or any other business-related information and, in many cases, to explain any news about the company that might not be positive. These reports are less detailed and not required by law. And, although supported by what a company files with the SEC, earnings reports are a way for a company to put a spin on their news, be it positive or negative — a kind of advertisement directed at current or potential investors.
Why do I need to know this?
Earnings reports are important in two ways. In a general way, earnings season can give a sort of report card on the economy as a whole. If a majority of companies seem to be doing well financially, the economic forecast for the country might be said to look good. On the other hand, it the financial information released in the reports is not so good, particularly in so-called market leaders or in a whole sector of the economy, then clouds might be on the economic horizon and, more importantly, the stock market might be in for a bumpy ride – to mix my metaphors a little. The other way that earnings season matters is if you are thinking of investing in a particular company, or maybe you already are invested in it, and you want to know how that one company did in the last quarter or how it expects to do in the next quarter. Maybe the company is facing a slew of lawsuits over one of its products or is planning on closing half its stores. Wouldn’t you want to know that before buying their stock? On the other side, maybe they have invented a new way to slice bread or have hired everyone in the country between the ages of 18 and 21. You would want to know that, too.
Earnings season gives you valuable information on the economy as a whole and on particular companies. It can be a bellwether for what to expect in the coming months for the stock market. You don’t have to be Bill Gates or Warren Buffet to make use of this information. If you are thinking of investing your hard-earned dollars in a company that has stock, it might be useful to know that newly imposed tariffs will affect the price of cars. Of course, performance in one quarter of the year might not tell the whole story, but if the information is there, why not make use of it?
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