BRAIN TEASER

On Friday, June 6, 2014, Apple closed at $645.57 per share. Apple did a 7-for-1 stock split over the weekend. What was its share price when the market opened on Monday morning?

Answer

What are earnings?

Cheat Sheet:

  • Earnings are a company’s quarterly profits.
  • They are usually expressed as Earnings Per Share, or EPS.
  • Analysts who track the company estimate what a company’s earnings will be.

 

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What are earnings calls?

Cheat Sheet:

  • The earnings call is when a CEO explains the earnings report and what to expect for next quarter.
  • Companies use the call to highlight successes or calm fears, depending on the situation.
  • They answer questions from investors and analysts.

When companies announce earnings, they conduct an earnings call where the CFO and/or CEO explains why earnings came out the way they did and what to expect for the next quarter.  They also answer questions on the call from investors and analysts. Remember, the analysts are already trying to make predictions for the next quarter!

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Why are Company Reports important?

Cheat Sheet:

  • Public companies are required to file written reports with the Securities and Exchange Commission (SEC).
  • The SEC protects investors by regulating companies and the stock market.

You know how you get report cards when you’re in school? If you’re a public company, you have to file a written report with the SEC every quarter.  It’s called a 10-Q, and here’s what one looks like: 

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Shareholder Meetings

Cheat Sheet:

  • Every year, companies hold a meeting for their shareholders.
  • Investors get to ask questions and vote on things like board members.

Most companies hold an annual shareholders meeting. If you’re a shareholder, you can attend and actually see the CEO in person!

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What is cost basis?

Cheat Sheet:

  • Cost basis is a fancy name for the price you originally paid for your stock.
  • It is used to calculate the money you made or lost for tax purposes.

The cost basis is the original value you paid for any investment, adjusted for stock splits and dividends. So if you buy 10 shares of AAPL at $150 per share and pay an $8 trading commission, your cost basis is 10 x $150 + $8 = $1508.

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