Financial reporting terms that are good to know
As Q2 earnings season comes to a close, I realize that there is a whole crop of MB readers that have joined over the past few months that might not know what it means when someone uses weird-looking terms like “y/y”, “q/q”, and “Q2” and “H1”.
These are examples of financial shorthand that makes it easier to read/consume financial news (once you get what they mean).
These terms aren’t intentionally difficult to grasp, but are instead optimized to give the most information possible in the least amount of space/text.
The “Q”/”H”/”9M”/”FY” terms tell us the period of time that the writer is referencing; Q for quarter (Q1/Q2/Q3/Q4), H for half-year (H1/H2), 9M for the first 9 months of the year, and FY for the full year.
The “y/y” and “q/q” tell us what time period the writer is comparing the current time period with. When you see “y/y”, that means that the writer is comparing the current year’s time period with the same time period last year.
When you see “q/q”, that means that the writer is comparing the current quarter with the quarter immediately previous to this one. For example, if you see “Q2 income up 5% y/y”, that means that this year’s Q2 income was up 5% relative to that company’s Q2 income from last year.
If you see “Q2 income up 5% q/q”, that means that this year’s Q2 income was up 5% relative to that company’s Q1 performance.
If you see something like “Q2 income up 50% y/y, down 5% q/q”, that means that the company’s income is up 50% relative to last year’s Q2, but down 5% relative to this year’s Q1.
You don’t need to use “y/y” when comparing 9M and FY results, as its just assumed that the increase is relative to the previous year’s period.
MB BOTTOM-LINE
I try to translate as much of the financial jargon as possible in my writing, but these are very useful terms to learn, and getting familiar with them will increase your understanding of the financial news that you read, and help you see through the headlines to get a better feel for what the data is actually saying.
For those readers that already know these terms, I hope you afford your fellow Barkadans the chance to get some of the basics down and level-up.
There’s always an opportunity to gain some XP in finance, but the more people we pull through the tutorial levels, the better for all of us!
The more we all know, the better the market.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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