How To Analyse Income Statement Pdf

The basic suite of financial statements a company produces at least annually consists of the statement of cash flows the balance sheet or statement of financial position and the income statement.

How to analyse income statement pdf. The second is that an income statement is based on a few very simple concepts which you already understand. Chapter 4 income statement and related information 4 3 illustration illustration 4 2 presents an income statement for boc hong company. The analysis of the income statement involves comparing the different line items within a statement as well as following trend lines of individual line items over multiple periods. Financial statement analysis is a method of reviewing a nd analyzing a company s accounting reports financial statements in order to gauge its past present or projected future performance.

An income statement is a company s financial statement that indicates how the revenue money received from the sale of products and services before expenses are taken out also known as the top line is transformed into the net income the result after all revenues and expenses have been accounted for also known as net profit or the bottom line. The information presented in these videos is also available in a free download which includes definitions of most terms mentioned in these presentations. Boc hong s in come statement includes all of the major items in the list above except for discontin ued operations. Financial analysis of an income statement can reveal that the costs of goods sold are falling or that sales have been improving while return on equity is rising.

In arriving at net income the statement presents the following subtotals. The next is the income statement shown in figure 3 2 which provides information on the revenues and expenses of the firm and the resulting income made by the firm during a period. The income statement which reports on how much a firm earned in the period of analysis. The period can be a quarter if it is a quarterly income statement or a year if it is an annual report.

By doing so investors. The point is that any income statement analysis should include some form of comparative analysis to give the reported numbers and associated metrics the needed context. This analysis is used to understand the cost structure of a business and its ability to earn a profit a proper analysis of the income statement requires that the following activities be addressed. How to analyze the income statement and in subsequent videos we cover the balance sheet and cash flow statement.