Quiz Are You Ready for Earnings Season? By Anne Kates Smith, Executive Editor | Kiplinger's Personal Finance and Daren Fonda, Senior Associate Editor | Kiplinger's Personal Finance April 20, 2018 Getty Images Corporate profits are the lifeblood of the stock market. During earnings seasons, which occur four times a year and follow the calendar’s four quarters, Wall Street is abuzz with corporate profit reports, and stocks are moving up or down – often dramatically – in accordance with them. But earnings aren’t exactly clear-cut. They can be measured by several yardsticks and flooded by a sea of acronyms, from GAAP to EBITDA. Take this quiz to test your earnings IQ and learn more about understanding companies' quarterly progress reports. Start Quiz Quiz | Are You Ready for Earnings Season? Question 1 of 9 What are GAAP earnings? A) Earnings that Grow at a Reasonable Pace B) Earnings reported in accordance with Generally Accepted Accounting Principles C) Earnings that show a wide variation from the prior period Quiz | Are You Ready for Earnings Season? Question 1 of 9 What are GAAP earnings? A) Earnings that Grow at a Reasonable PaceB) Earnings reported in accordance with Generally Accepted Accounting Principles A company’s net income, or “bottom line,” is its GAAP earnings, which includes the good, bad and ugly of financial performance. Net income reflects a firm’s profits after accounting for all of the expenses of running the business, plus any one-time charges or windfalls. C) Earnings that show a wide variation from the prior period Next Question Quiz | Are You Ready for Earnings Season? Question 2 of 9 EBIT earnings look at net income before taking this into account: A) Income Taxes B) Interest payments and Taxes C) Insider Trades Quiz | Are You Ready for Earnings Season? Question 2 of 9 EBIT earnings look at net income before taking this into account: A) Income TaxesB) Interest payments and Taxes A variant is EBITDA, which stands for earnings before interest, taxes, depreciation (the decrease in value over time of an asset, such as equipment or machinery) and amortization (the loss of in value of an intangible asset, such as a trademark). C) Insider Trades Next Question Quiz | Are You Ready for Earnings Season? Question 3 of 9 Operating earnings … A) are the profits earned after excluding revenues and expenses that aren’t part of the day-to-day business operations. B) are synonymous with EBIT. C) are helpful in comparing companies to competitors, or even to firms in different industries. D) All of the above. Quiz | Are You Ready for Earnings Season? Question 3 of 9 Operating earnings … A) are the profits earned after excluding revenues and expenses that aren’t part of the day-to-day business operations.B) are synonymous with EBIT.C) are helpful in comparing companies to competitors, or even to firms in different industries.D) All of the above. Operating earnings, which are the same as EBIT, give you a clear picture of the health and efficiency of a company’s core business. Next Question Quiz | Are You Ready for Earnings Season? Question 4 of 9 Adjusted earnings … A) omit one-time or irregular gains or expenses, such as from the sale of equipment or the destruction of inventory in a flood. B) are synonymous with “pro forma” earnings. C) are controversial. D) are typically the figures Wall Street analysts use to estimate earnings. E) All of the above. Quiz | Are You Ready for Earnings Season? Question 4 of 9 Adjusted earnings … A) omit one-time or irregular gains or expenses, such as from the sale of equipment or the destruction of inventory in a flood.B) are synonymous with “pro forma” earnings.C) are controversial.D) are typically the figures Wall Street analysts use to estimate earnings.E) All of the above. Not everyone agrees on adjusted earnings. Some believe they present a clearer picture of the underlying profits a business is actually generating, others say they mostly airbrush bad stuff out of the numbers. That said, companies that report adjusted earnings must also report the differences with GA... Read more ˅ Not everyone agrees on adjusted earnings. Some believe they present a clearer picture of the underlying profits a business is actually generating, others say they mostly airbrush bad stuff out of the numbers. That said, companies that report adjusted earnings must also report the differences with GAAP earnings so that investors can compare the two. But for better or worse, adjusted figures are often what move a stock up or down. Less ˄ Next Question Quiz | Are You Ready for Earnings Season? Question 5 of 9 Which earnings figure is best for investors to pay attention to? A) GAAP B) Operating C) Adjusted D) All of the above Quiz | Are You Ready for Earnings Season? Question 5 of 9 Which earnings figure is best for investors to pay attention to? A) GAAPB) OperatingC) AdjustedD) All of the above GAAP earnings give you the complete picture, but they can be clouded by one-time events or other charges that might misrepresent the health of the day-to-day business, which operating and adjusted earnings are meant to capture. Next Question Quiz | Are You Ready for Earnings Season? Question 6 of 9 Which measures of a company’s financial health can help you assess the quality of its earnings? A) Cash flow statement and balance sheet B) Sustainability scores C) CEO tenure Quiz | Are You Ready for Earnings Season? Question 6 of 9 Which measures of a company’s financial health can help you assess the quality of its earnings? A) Cash flow statement and balance sheet A company’s cash flow statement and balance sheet are great sources to help evaluate the quality of earnings. They can help you determine whether profits are flowing from solid business operations or need lots of help from the accounting department to look good. B) Sustainability scoresC) CEO tenure Next Question Quiz | Are You Ready for Earnings Season? Question 7 of 9 Is it more important to look at projected earnings or profits that have already been reported? A) Projected, also called estimated earnings B) Reported, also known as trailing earnings C) Both have unique advantages Quiz | Are You Ready for Earnings Season? Question 7 of 9 Is it more important to look at projected earnings or profits that have already been reported? A) Projected, also called estimated earningsB) Reported, also known as trailing earningsC) Both have unique advantages Reported earnings have the advantage of being after-the-fact. They’re logged in the books, while estimated earnings are, well, estimates. They may or may not come to fruition, and in fact, are revised over and over again by Wall Street analysts. Yet earnings estimates are forward-looking, and a co... Read more ˅ Reported earnings have the advantage of being after-the-fact. They’re logged in the books, while estimated earnings are, well, estimates. They may or may not come to fruition, and in fact, are revised over and over again by Wall Street analysts. Yet earnings estimates are forward-looking, and a company’s prospects, after all, are what is most important to investors. Less ˄ Next Question Quiz | Are You Ready for Earnings Season? Question 8 of 9 An earnings “beat” occurs when: A) A company reports profits that exceed the prior quarter’s. B) A company reports profits that exceed what corporate management had planned for. C) A company reports earnings above the average of Wall Street analysts’ estimates. Quiz | Are You Ready for Earnings Season? Question 8 of 9 An earnings “beat” occurs when: A) A company reports profits that exceed the prior quarter’s.B) A company reports profits that exceed what corporate management had planned for.C) A company reports earnings above the average of Wall Street analysts’ estimates. When a company reports results that beat analysts’ expectations, it can lead to a pop in its share price. Shares in aluminum producer Alcoa (AA) and financial giant American Express (... Read more ˅ When a company reports results that beat analysts’ expectations, it can lead to a pop in its share price. Shares in aluminum producer Alcoa (AA) and financial giant American Express (AXP) both jumped recently after reporting quarterly results that topped what analysts were expecting. Less ˄ Next Question Quiz | Are You Ready for Earnings Season? Question 9 of 9 True or false: Investors should disregard any company that doesn’t log hefty and growing profits. A) True B) False Quiz | Are You Ready for Earnings Season? Question 9 of 9 True or false: Investors should disregard any company that doesn’t log hefty and growing profits. A) TrueB) False Earnings matter more for mature companies than for fast-growing startups that are just developing products and building markets. Amazon.com (AMZN) is the poster company in this regard. Shares of the online firm have soared w... Read more ˅ Earnings matter more for mature companies than for fast-growing startups that are just developing products and building markets. Amazon.com (AMZN) is the poster company in this regard. Shares of the online firm have soared well more than 1,500% over the past decade, trouncing companies that have reported earnings growth of much greater magnitude – no matter how those earnings were measured. Less ˄ See Results Quiz | Are You Ready for Earnings Season? Results Next QuizCan You Answer Jeopardy!’s Trickiest Investing Questions? See All Quizzes answer_num=2,2,4,5,4,1,3,3,2|answer_text="B) Earnings reported in accordance with Generally Accepted Accounting Principles","B) Interest payments and Taxes","D) All of the above.","E) All of the above.","D) All of the above","A) Cash flow statement and balance sheet","C) Both have unique advantages","C) A company reports earnings above the average of Wall Street analysts’ estimates.","B) False"|total_questions=9|url=/quiz/investing/T052-S001-earnings-season-everything-you-need-to-know/index.html|total_pages=20|page_id=18596|evaltext_num=0|kipad_id=StocksBondsQuizzes Advertisement Advertisement Sponsored Financial Content Show comments