Companies use quarterly earnings reports to communicate performance and financial health to investors or shareholders, according to Investopedia. These reports are released at the end of each quarter and include financial items such as net sales, net income, earnings from continuing operations and earnings per share.
A company's earnings report serves as a report card that informs shareholders or investors how well the company performed over the last quarter, with quarters generally beginning each January, April, July and October, explains Investopedia. Net income and earnings per share are the most commonly used key metrics, and these metrics are measured against the previous years' numbers. The analysis and comparison of these numbers allow investors to determine the financial health of the company.
An earnings report is also a tool used by publicly traded companies to display value to potential investors. The report is an important financial document and has the ability to persuade potential investors to invest in the company. An earnings report is released by the company, however, and investors should understand that the report attempts to present a profitable picture of the company, without breaking any SEC regulations, notes Investopedia. Learning how to read between the lines is an important aspect of fully understanding a company's earnings report.