How To Read A Comparative Income Statement

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.

How to read a comparative income statement. Normally an income statement should be presented with at least two prior fiscal years in a comparative format as shown below on the income statement example of apple inc. This example financial report is designed for you to read from the top line sales revenue and proceed down to the bottom line net income. A balance sheet on the other hand records assets liabilities and equity. While the definition of an income statement may remind you of a balance sheet the two documents are designed for different uses.

Here s how an income statement is usually. The income statement vs. Now given this let s try to understand how a comparative statement is interpreted using an example. You don t have to flip back and forth between individual documents.

Identifies the business the financial statement title and the time period summarized by the statement. 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. This percentage change in items is mentioned in column v of the comparative income statement. An income statement tallies income and expenses.

The second is that an income statement is based on a few very simple concepts which you already understand. The easiest way to create a comparative income statement is to list the accounts in the left column. Recall that horizontal analysis calculates changes in comparative statement items or totals. A comparative income statement makes it easy to point out trends in performance.

There is no standard comparative income statement format. The intent of this format is to allow the reader to compare the results of multiple historical periods thereby giving a view of how a business is performing over time. This enables comparison of the performance with the prior year results and indicates the trend a company has in generating revenues and incurring expenses. Each step down the ladder in an income statement involves the deduction of an expense.

Consider the following income statement for m s singhania for the years ended december 31st 2017 and december 31st 2018. Comparative income statement format of abc limited for the period ended 2016 and 2017. The comparative financial statements of synotech inc will serve as a basis for an example of horizontal analysis and vertical analysis of a balance sheet and a statement of income and retained earnings.