Corporate earnings are a major factor that influences trading, with positive reports driving up stock prices and attracting new investors. In contrast, bad news can cause price declines, spooking traders into selling quickly. Those who trade in response to company reports can end up losing money if they don’t do their homework first.
Earnings are the amount of money a company makes during a period, and they’re typically reported quarterly. They include the total amount of revenue (sales) as well as the cost of goods sold, operating expenses, and taxes. This data allows investors to see how efficiently a company is running, and can be compared to past periods to uncover trends or patterns.
Profits are also a key statistic used by central banks when making important economic policy decisions. For example, if companies are reporting strong profits, it’s likely that the economy is doing well, which would influence the decision of a central bank to increase or decrease interest rates or other economic interventions.
The Bureau of Economic Analysis releases corporate earnings data to the public on a regular basis. Investors, Congress, policymakers, and business leaders use this information to make decisions that affect the American economy.