The number

The estimated reading time for this post is 95 seconds

Whilst catching up on my backlog of mails I came across this from CBS Marketwatch on Yahoo! making the number. The number is the consensus that market analysts think that a company will make in a given quarter:

NOT MUCH SHOUTING GREETS YAHOO EARNINGSYahoo shares (YHOO) got the boot after the company kicked off a fresh earnings season for the online-media group by only just measuring up to expectations, demonstrating what American Technology Research analyst Mark Mahaney called a mantra: “in-line quarters don’t cut it for Internet stocks.”

Ok, basically what this guy Mahaney is saying that because Yahoo! managed to get their profit for the quarter in line with what a number of market anlaysts expected them to be (based on a guestimate set maybe 90 to 180 days back) then they deserve a kicking.

Unbelievable, accountancy despite the use of numbers is not an exact science, why?

• Bills and sales are constantly coming in and out of a company
• What does a sale really mean? If you sign a 3 year deal for online advertising, should Yahoo! claim that as a sale all at once or claim as the money comes in
• When is the money in? When you invoice for it, or when it sits in your bank account
• Is the capital gains made on the building you own and work out of profit?
• If you had a bumper quarther this time but you know that the next quarter will be soft, should you avoid booking all the sales in to give you an income cushion next quarter?
• How should you write off the depreciating value of computer equipment, chairs or a forklift truck? There can be more than one way of doing it that will affect the figures

With this in mind, I would recommend that you read The Number by Alex Berenson, which takes you through the insanity of it all in greater depth.