Question

Why is it important to use companies’ earnings releases prior to the filing of 10-Qs?

Answer 1

The Securities & Exchange Commission (SEC) NORMS requires companies to file their earnings reports no later than 45 days after the end of their first three quarter's end, and their fourth quarterly and annual reports 90 days after their fiscal year end. Companies file quarterly earnings reports on Form 10-Q or 10-QSB and yearly earnings reports on Form 10-K or 10-KSB.

The form 10-Q is a comprehensive report of a company's performance that must be submitted quarterly by all public companies to the Securities and Exchange Commission (SEC, U.S). In the 10-Q, firms are required to disclose relevant information regarding their financial position. Earnings reports include items such as net income, earnings per share, earnings from continuing operations and net sales. By analyzing quarterly earnings reports, investors can begin to gauge the financial health of the company and determine whether it deserves their investment.

The U.S federal securities laws requires publicly traded companies to disclose company information on an ongoing basis. For example, domestic issuers must submit annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K for a number of specified events and must comply with a variety of other disclosure requirements. These measures are put into law by the SEC to protect the interest of the investors who willbe updated about themajor information about their investment on quarterly basis. This will also act as a monitoring and reporting control on companies regularly.

The Form 10-Q includes unaudited financial statements and provides a continuing view of the company's financial position during the year. The report must be filed for each of the first three fiscal quarters of the company's fiscal year. The SEC has categorised filers of form 10Q into 3 categories: Large Accelarated Filer, Accelarated Filer and Non Accelarated filer for the deadline for filing form 10Q.

Form 10-Q of a company can give insight into changes that are happening in a business long before those changes show up in the earnings figures. You notice things like heavy net share repurchases during the year that haven't, yet, been figured into the annualized earnings per share figures due to the way diluted earnings per share is calculated. You see that the inventory turnoveris getting better or worse or that the accounts receivable turnover is improving or flashing warning signs that there may be a credit problem with customers. You notice changes in working capital. You learn about lawsuits and potential legal risks for which reserves haven't been established. You can track thecompany's underlying events using form 10Q much before they have been accounted for in the annual financial statements and thus take informed decisions about their investment in the company. Thus form 10Q equips an investor with insights into the important financial strengths or constraints of the company and also for industry analysis of peer companies. Form 10Q comprises unaudited financials, important steps of the company undertaken during the quarter, comparison of this quarter figures with previous quarter and this year's with previous year's numbers.

Earnings reports tell you how much the company made during the quarter. The report contains all the vital financial results for the quarter, including the net income and earnings per share, which is how much of the company’s profit you can lay claim to as a shareholder.

Don’t confuse 10-Q filings with a company’s quarterly earnings report. There’s overlap, but they are very different. The earnings report is essentially a press release; with some limits, companies can emphasize the good news and downplay, or even omit, the bad news much more readily than they can with 10-Q filings. Even where it includes a range of financial data, an earnings release typically contains a fraction of the detail that a 10-Q does. The earnings release often comes out first; by the time the 10-Q comes out days or weeks alter (or even just later in the day), most reporters and many investors have moved on to something else. The 10-Q often includes the bad news that companies would rather ignore, or hints of future developments that may be of great interest to investors, as well as to your audience.

After we have established what is form 10Q and what is the importance of form 10Q to an investor, we need to establish that companiy's earning releases should be published prior to filing of form 10Q since