What is a Quarterly Earnings Report?

A quarterly earnings report is the Form 10-Q that a publicly-held firm files with the Securities and Exchange Commission on a quarterly basis. This report contains the financial statements that reveal the revenues, expenses, profit or loss, and cash flows for the past quarter, as well as a balance sheet as of the end of the quarter. This report contains many of the topics listed in an annual report, thereby providing a detailed view of a company's operational results and financial position. Besides the financial statements, a quarterly earnings report contains management's discussion of events that occurred during the quarter, as well as a number of mandatory disclosures.

How to Use a Quarterly Earnings Report

Investors typically examine the results reported in a quarterly report to the trend line of prior results, which may result in decisions to buy or sell a company's shares. It is also useful to peruse the accompanying footnotes, to see if the company has revealed anything that is operationally or financially significant. Thus, the issuance of a quarterly report is keenly anticipated by investors.

Advantages of a Quarterly Earnings Report

There are several advantages associated with the quarterly earnings report format and timing, which are as follows:

Provides feedback to investors. A quarterly earnings report gives investors a reasonably up-to-date view of the financial circumstances of the reporting entity. Otherwise, they would have to wait a full year between the issuances of annual reports. This allows investors to alter their investments, depending on the information in the earnings report.
Increases publicly-available information. A quarterly earnings report minimizes the amount of confidential information retained within the firm, which could otherwise be used by insiders to illegally gain an investment edge over outside investors.
Provides guidance. An issuer can include forward-looking guidance in its quarterly earnings report. This gives the investment community a better sense of future performance, which impacts how the firm’s stock is priced. It also sets analyst expectations for management activities over the short-term.

Auditor Examination of the Quarterly Earnings Report

The quarterly financial statements are reviewed by auditors, which is a reduced examination from the full audit procedures applied to the year-end results of a business. A review allows auditors to more rapidly complete their examination for a reporting entity’s financial statements, so that it can issue the statements by the SEC’s mandated deadline.