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 205

many companies have also decided to divest their Internet side of their businesses into separate companies. An example of this would be the bookseller Barnes & Noble, which broke off its online business, Barnes&Noble.com into an independent company in 1998.

Sometimes a company may decide to sell a piece of its business to another company to better focus on its core business, rather than spinning off that piece into a separate company. Such a move may make more sense, as that piece may be deemed too weak to operate by itself. This may again receive a favorable reaction from the investors, as they may view this as a way for the company to shed a non-related (and perhaps non-profitable) business, become leaner, and use the sale proceeds to further expand the core business. An example is AT&T selling its credit card operation to Citibank in 1998.

Earnings

A company's measure of viability and success ultimately comes down to its earnings, which is eventually reflected in its stock. Earnings is the amount of profit a company generates. This is simply the company's revenues less its costs during a given period of time. This period of time can be of any length, but quarterly and annual earnings are mainly what the market watches for. Public companies must as a matter of law report their earnings per quarter and per year. The quarters and years follow a company's arbitrary calendar, known as its fiscal calendar. The fiscal year starts at some point in the year and ends one year later. Fiscal quarters are four evenly divided periods within the fiscal year, each being equivalent to about three months. Different companies may have different fiscal calendars since fiscal calendars are mostly designed to follow the companies' business cycles. Not all fiscal calendars start January 1 and end December 31.


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