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How to analyze Quarterly Results?

The quarterly reports and financial statements are indicators that provide information about the quarterly progress of a business towards its estimated yearly target. As per the guidelines prescribed by SEBI (Securities and Exchange Board of India), it's compulsory for every company listed on the stock exchange to release its quarterly reports to the public. These quarterly reports will help the investors learn about their stock market investments and progress of the company

Quarterly reports help the investors analyze the company's performance so they will be able to make informed decisions with their share market investments. However, investors must learn how to analyze these reports, benefiting them in the long run.

If investors wish to read the quarterly results, they must consider the following factors:

 

  1.       Net sales:

A net sale is the sum of a company's gross sales after deducting the discounts, returns and allowances. They are often factored in when reporting on the income statement with top-line revenues. They are a good indicator of the company's health.  

 

  1.       Gross sales:

A company's total number of sales within a specified time period is known as the gross sales. A steady growth in a firm's gross sales indicates growing demand, good performance and good business health. 

 

  1.       Operating income:  

The operating income will provide information on the profit amount earned through the company's operations after deducting the operating expenses like wages, depreciation and the cost of goods sold. The operating income measures the profitability of the company.

 

Things an investor should consider for quarterly reports:

 

  1.       Margins:

Margins indicate the safety net of the company. The profit must not ideally come at the margin's cost. When there is a decrease in the company's EBIT margin, it indicates that its profitability has been affected. 

 

  1.       Operating profit:

The operating profit can be calculated by deducting the operating expenses from the net sales. These expenses include running the business like utility bills, salaries, electricity, office expenses like stationery and license costs. They also include the cost for research and development, bank and legal charges and many others. Other variable and fixed expenses that form a part of the operating costs will have to be deducted from the net sales to get the business's operating profit. 

 

  1.       Interest cost:

It is the money paid for a loan amount to run a business. Therefore, a rise in the interest cost indicates an increase in the company's debt. 



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