Reference no: EM133757770

Question: You will use the income statement as your primary source for this section. Simply tell me how the company has performed over the years, with emphasis on the last two fiscal years. You start at the top line (revenue/sales) and work you way down to the bottom line (net income). Remember, a number is just a number; you have to use it as your starting point to understand the story behind that number. Compare the company's prior year income statement to get an idea if things are going up or down. Also compare it competitor's performance.

Make full use of ratios you learn in chapter. Explain the underlying reasons behind the trend of numbers. Why did sales go down? Why did expenses go up? A good starting point is the Management's Discussion and Analysis of Financial Condition and Results of Operations in the annual report. This is a government required section in the annual report, where the management must tell you what has happened to the company and why. But they are paid to put a good spin on things, so don't just take management's word for it. Do your own research to support your conclusion. Remember, most of the time you will not be able to find a conclusive answer. Don't be discouraged. As an analyst you must come up with a conclusion based on limited information provided. Tell me why do you think, based on some supporting information, revenue and expenses went up or down. Present data on major line item figures and compare them to at least one of their major competitor's performance.