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Monday, May 5, 2014

Understanding Earnings – a dummies’ guide

In the middle of results season, several companies are announcing their quarterly and annual results every day. Financial terms like operating income, EBITDA, EPS, cash flow are being used to explain company performance.

Such terms may be familiar to CAs and commerce graduates but may sound like gobbledygook to those who have a background in science or humanities. In a recent article at morningstar.com, financial terms related to earnings announcements by companies have been explained.

Here is an excerpt:

Revenue: Quite simply, this is the amount of money the company has brought in for goods and services provided over the given time period. Revenue growth, in particular, is a statistic to watch because it may indicate whether the company's business is growing or declining.

Gross profit: The amount of company revenues left over after subtracting the cost of producing the goods and/or services it has sold. These include costs such as raw materials, salaries of the workers who make the products or deliver the services, and other production-related expenses.”

Read the rest of the article here.

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