Earnings season is judgment day for stocks. It happens four times a year, after the last month of each quarter (March, June, September, December), as public companies release their earnings results from the previous quarter. Traditionally, Alcoa (AA)’s results “kick off” the season, and away we go.
Federal securities laws require companies to disclose revenue and earnings in a standard format that gives investors a view of its financial position—a report card of sorts—this info isn’t always the easiest for the average investor to decipher and tell exactly what a company is trying to say—or trying not to say.
But that doesn’t mean that this is rocket science. If you can read the side of a cereal box for its nutritional facts, then you can read a financial statement. And there are a handful of important numbers that will be able to tell you the financial health and growth of a company in a few short minutes.
Let’s take a look at the three most important aspects of a financial statement.