Why don't companies underestimate their earnings to make quarterly reports look better?
Stating poor estimates in advance will lower your share price to compensate for thge extras boost it gets later ... And may run afoul of stock manipulation laws. More pain than gain likely. You need to distinguish a company's guidance from analysts' estimates. A company will give a revenue/earnings guidance which is generally based on internal budgets. The guidance  may be aggressive or conservative - some managements are known to be conservative and the market will take that into account to form actual estimates. When you see a headline saying that a company missed, it is generally by reference to the analysts' estimates. Analysts use a company's guidance as one data point among many others to form a forecast of revenue/earnings. The idea behind those headlines is that the average sales/earnings estimates of analysts is a good approximation of what the market expects (which is debatable).
The company's value (which should be reflected in the share price) is not how much money it has in the bank, but something along the lines of 'how much money will it make between now and the end of times' (adjusted for time value of money and risk). So when you purchase a share of a company that has, say, little money in the bank, but expects to make 1M$ profit this year, 2M$ for the following 3 years, and say, nothing after, you are going to pay your fraction of 7M$ (minus some discount because of the risk involved). If now they announce that their profits were only 750k$, then people may think that the 2M$ are more likely to be 1.5M$, so the company's value would go to ~ 5M$. And with that, the market may perceive the company as more risky, because its profits deviated from what was expected, which in turn may reduce the company's value even further. Varying the amount to reflect income during the quarter is entirely legitimate -- consider someone like a salesman whose income is partly driven by commissions, and who therefore can't predict the total. The payments are quarterly precisely so you can base them on actual results. Having said that,  I suspect that as long as you show Good Intent they won't quibble if your estimate is off by a few percent. And they'll never complain if you overpay. So it may not be worth the effort to change the payment amount for that last quarter unless the income is very different. "Company values (and thus stock prices) rely on a much larger time frame than ""a weekend"".  First, markets are not efficient enough to know what a companies sales were over the past 2-3 days (many companies do not even know that for several weeks).  They look at performance over quarters and years to determine the ""value"" of a company.  They also look forward, not backwards to determine value.  Prior performance only gives a hint of what future performance may be.  If a company shut its doors over a weekend and did no sales, it still would have value based on its future ability to earn profits." "Hi, accounting major here!  A lot of people mentioned both tax advantages and ""cheap"" money (money you can borrow at a low interest rate).  Another reason businesses do this is to reward investors. Generally people with stock in a company want to see some of its operations financed with debt, instead of all of it financed from investors' money or profit. This way the company can grow more and still pay better dividends to its investors. However, you don't want too much debt either. It's a balance, and a way to see how much debt vs equity a company has is called a leverage ratio (leverage=debt). Hope this helps!" Their net income hangs around zero because they raise expenses as reinvestment in the company (line items like $16.09B in Research &amp; Development expense last year).  Retained earnings is a balance sheet item reflective of assets they're holding for projects in a later fiscal period; they aren't waiting for the next period to reinvest. Changes in implied volatility are caused by many things, of course, and it is tough to isolate the effect you are describing, but let's try to generalize for a moment. Implied volatility is generally a measure of how much expect uncertainty there is about the future price of the stock.  Uncertainty generally is higher in periods including earnings announcements because it is significant new information about the company's fortunes can make for significant changes in the price. However, you could easily have the case where the earnings are good and for some reason the market is very certain that the earnings will be good and near a certain level.  In that case the price would rise, but the implied volatility could well be lower because the market believes that there will be no significant new information in the earnings announcement. But that's the point. Financial analysts may have to make adjustments to get closer to some idea of true value. Auditors should assure comparability by testing adherence to sometimes arbitrary rules that at least are common (if the world outside the US doesn't exist, or the world doesn't include the US). Most companies want to grow. In order to grow, you need to do better than just breaking even. If you want to keep hiring, or building new facilities, you'd probably want to retain some of your earnings year over year. That's just one reason. Shareholders also want to see a higher return on their investment; dividends are paid out of retained earnings, rather than expensed in the calculation of profits. Decreasing profits decreases retained earnings, which pisses off shareholders. I'm sure someone else can expand on this or fill in any other holes.  Edit: Someone please correct me if I'm off base here. My comment is a bit confusing at times. For instance, tax  expense is included in the calculation of book income, but not taxable income, and this comment deals with both. In general over the longer term this is true, as a company whom continuously increases earnings year after year will generally continue to increase its share price year after year. However, many times when a company announces increased earning and profits, the share price can actually go down in the short term. This can be due to the market, for example, expecting a 20% increase but the company only announcing a 10% increase. So the price can initially go down. The market could already have priced in a higher increase in the lead up to the announcement, and when the announcement is made it actually disapoints the market, so the share price can go down instead of up. Not sure why you are getting downvotes. Managing to the next quarters numbers at the expense of the future is rampant in big companies these days. I work at a big bank and it’s really becoming a large problem. Individual contributors can only do so much to hide the fact that management is sacrificing the future for their quarterly bonus. In any one quarter it’s no big deal but when it’s done for years as is likely the case with GE it does cause huge problems. Dividends are not paid immediately upon reception from the companies owned by an ETF. In the case of SPY, they have been paid inconsistently but now presumably quarterly. If you look at the value as a composite, as Graham seems to, then look at its constituent parts (which you can get off any financials sheet they file with the SEC): For example, if you have a fictitious company with: Compared to the US GDP (~$15T) you have approximately: Now, scale those numbers to a region with a GDP of, say, $500B (like Belgium), the resultant numbers would be: If the company reported a loss at the previous quarter when the stock what at say $20/share, and now just before the company's next quarterly report, the stock trades around $10/share. There is a misunderstanding here, the company doesn't sell stock, they sell products (or services). Stock/share traded at equity market. Here is the illustration/chronology to give you better insight:   Now addressing the question What if the stock's price change? Let say, Its drop from $10 to $1 Is it affect XYZ revenue ? No why? because XYZ selling ads not their stocks the formula for revenue revenue = products (in this case: ads) * quantity the equation doesn't involve capital (stock's purchasing) Yep, I often think that baby boomers don't understand that there's inflation and that the salary they had years ago might not be good enough..  Sure, median income has decreased in the last decade, but it's no excuse for paying engineers 45K because they'll jump ship as soon as they put their resume on Monster and get offer of 60-80k. I'm no financial advisor, but I do have student loans and I do choose to pay them off as slowly as I can. I will explain my reasoning for doing so. (FWIW, these are all things that pertain to government student loans in the US, not necessarily private student loans, and not necessarily student loans from other countries) So that's my reasoning. $55 per month for the rest of my life adds up to a large amount of money over the course of my life, but the impact month-to-month is essentially nonexistent. That combined with the low interest and the super-low-pressure-sales-tactics means I just literally don't have any incentive to ever pay it all off. Like I said before, I'm just a guy who has student loans, and not even one who is particularly good with money, but as someone who does choose not to pay off my student loans any faster than I have to, this is why.