Earnings: Looking good?

So far earnings this quarter have been looking great considering our environment, right?

Wrong. While the bottom line of net profit may be looking tasty and better than it has in a long time, that is due to the cutting of jobs. We need remember that among this media spin of good profits, is the fact that the top line items (sales) have been shrinking.

Just a reminder that it is good to look at the company's financial position, and how they got there, not just the bottom line.

Here's is a little piece from The Reformed Broker:

I run a fairly sizable brokerage and advisory business. I could fire my staff and cut off the research products I subscribe to and only commute to work 4 days a week instead of 5 and stop wining and dining prospective clients and drop the amount of states I do business in to lower registration fees. And yes, my take home pay would look much improved at first. But then what? How can I grow my book of business if I've gutted it of the raw materials and resources it needs to get bigger?

The answer is I cannot, and as my revenues decline, my juicy margins from all that expense trimming are sure to fade along with them. And then no one is happy, especially not the wife or her salesgirl at Bloomingdales.

The meeting of temporary profitability targets may earn execs their bonuses and make for good headlines, but at some point, you aren't aren't just cutting fat - you're chopping into the muscle itself that you need to walk the next mile.