Understanding earnings

Decode the confusing terminology used to report company performance.

Adam Zoll 14 March, 2014 | 6:00PM

Question: When companies report their financial performance, I hear terms such as "earnings," "profits" and "revenue," but I don't understand the differences. Can you clarify what these and related terms mean?

Answer: Some investors may be left scratching their heads at the variety of financial terms mentioned 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 are required to report each quarter and at the end of their fiscal years. Terminology used here is consistent with that used on Morningstar.ca under the Financials tab of each stock report.

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.

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Adam Zoll

Adam Zoll  Adam Zoll is an assistant site editor with Morningstar.com

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