How to Understand Company Earnings Statements

Earnings, profits, revenue and cash flow typically flood the financial news on a quarterly basis, leaving some stock investors confused

Adam Zoll 5 March, 2014 | 7:00AM

As earnings season draws to a close, some investors may be left scratching their heads at the variety of financial terms bandied about in news reports and company documents. If you're one of the many who has trouble keeping them all straight, here's your guide to some of the most important metrics that publicly-traded companies report at the end of their fiscal years and often in shorter statements throughout the year. Terminology used here is consistent with that used on Morningstar.co.uk's Equity Reports.

Turnover: Quite simply, this is the amount of money the company has brought in for goods and services provided over the given time period. Turnover growth (also referred to as 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.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Adam Zoll  is an assistant site editor with Morningstar.com, the sister site of Morningstar.co.uk.

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