Income Statement Analysis
Income statement analysis is linked with research of revenues and expenses of the company and comparing the figures to its past and industry peers.
Income statement analysis is the first footprint of exploring financial statement forms. The easiest way to find income statement of companies is browsing investor's corner of their websites, where investor will most often find quarterly and yearly reports.
Professional investors do an income statement analysis at once after the company publishes new quarterly report. Since that is the moment when public is informed of the latest business results, how much did the company bring in revenues?. How much did the company spent in terms of costs? And how profitable were their activities in terms of earnings in the latest time period.
The very first thing an investor should check while reading income statement is whether the company is bringing in money or not. If the company is expending more money than it brings in, investor should be very careful before investing in such company's stocks. On the other side, if expenses of the company are considerably under control and they manage to bring forth much higher revenues. Investor should rank such company as the one with strong basic principle and put it on the top of the list of stocks for possible investment.
Revenues
Revenues or sales are the first figure investor should research when doing income statement analysis. Investor can find this figure on the top of the statement, very often as one single number, which can be broken down with respect to geography or by business segment with big companies.
What investor should research in depth is the dynamic of revenues of the company over the years and within the year. It is a positive symptom, if the company is raising its revenues constantly and bettering its economically yielding material profit in this way. If there are only not lasting increases of revenues since of some marketing activities, it is not as potential as constant improvement. Sta bile development of revenues is what investor are looking for.
Expenses
Every company participating in business has many types of expenses. The most common ones are expenses related to the Costs of Goods traded and other operational expenses and financial expenses.
Costs of Goods Sold
Costs of Goods traded is the expense directly related to bringing about how much is the cost for the company to yield the good or service or purchasing how much is the cost for the company to leverage the good or service the goods or services traded by the company.
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