Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 211

investors may look at a company's revenues to get a feel for the company's business activities. Other factors may include inventory turnover rate, expense reduction, market share, actual and potential future orders, gross margins (products' selling price less the cost of making them), operating income (profit less than the cost of running the business), and many more. If any of these factors point to a potential higher future earnings, the company's stock could get a lift as well.

At times companies may announce one-time charges, or one-time proceeds. These may occur as a result of the cost of layoffs, cost of acquiring a business, or sale of a property. While these one-timers do affect the company's actual earnings for a particular quarter, investors and analysts usually exclude them from the company's earnings since these are non-recurring events. Many times companies also report these one-time items separately from their operating earnings numbers.

Sometimes investors are quite prepared to accept losses from a company. Many companies may run into earnings shortfalls because they may be spending (sometimes referred to as "burning") cash to expand their businesses and market shares. These expenses are at times accepted costs for a company trying to establish itself. Many startups fall into this category. With Internet and e-commerce-related companies springing up all around in the late 90s, negative earnings had become an accepted concept. Of course this trend could not continue forever. Companies must establish themselves as profitable or they will eventually become extinct.Many investors continued to invest in these companies in the hopes that someday these companies would become profitable and their earnings would be able to justify their stock prices. By 2000 reality finally caught up with many of these companies, causing many to lose significant values in their stocks or just close their doors. As with other companies analysts also maintain quarterly


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    Table of Contents Copyright and Disclaimer Foreword Money
    Bonds Futures Stocks Options
    Mutual Funds Retirement Final Words Appendix A
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