Earnings
Earnings
When it comes to the world of trading, there are countless terms and jargon that might seem complex at first sight. One such term is 'Earnings'. This entry aims to deliver a solid understanding of what 'Earnings' means in the sphere of trading. We shall break down this concept in a way that's easy for beginners and serves as a reliable refresher for more seasoned traders.
Defining Earnings
Simply put, Earnings refer to the profit that a company makes. It is the amount left over after deducting all costs and expenses from the company’s total revenue. These costs and expenses encompass everything from operating expenses, like salary payments and rents, to interest payments and taxes.
Earnings Per Share (EPS)
In the context of trading, Earnings Per Share (EPS) is a concept you will come across frequently. EPS presents the portion of a company's profit allocated to each outstanding share of common stock. In simpler words, it indicates how much money a company earns for each share of its stock. It’s a vital tool used by traders to determine the profitability and financial health of a company.
Earnings Reports and their Value in Trading
One of the most awaited documents in the trading world is the earnings report. A company releases its earnings report quarterly or yearly, revealing its earnings over that period. This report is of utmost importance to traders as it provides an insight into the company's profitability. A positive earnings report usually leads to an increase in the company's stock price, while a negative report can cause the price to fall.
Earnings Season
There is also a period known as the 'Earnings Season'. What is this, you ask? Earnings Season is a few weeks every quarter where majority of public companies release their earnings reports. This period is often marked by heightened trading activity and volatile stock prices, as traders digest the newly released earnings reports and adjust their portfolios accordingly.
In conclusion, 'Earnings' is not just about knowing the company's profits. It plays a pivotal role in trading decisions. Its various features, such as EPS, earnings reports and the earnings season, significantly impact the company’s stock prices and, in turn, the trading market.
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