No. of Recommendations: 8
Dear y'all,
This is the "Income Statement" part of the latest version of the "Reading
Financial Statements" FAQ. As always any suggestions are appreciated.
Hope y'all find it useful.
Best,
Lleweilun Smith
Q. What is the format of the income statement?
A. The income statement may also have the names "Consolidated Statement
of Income", "Consolidated Statement of Operations" or something similar.
In general there is three years of information on the annuals.
The format varies between different types of companies, what follows is a
generic form for a retailer or a generic industrial.
Sales For many types of companies
the cost of goods sold is the
Cost of goods sold (COGS) highest single expense. Gross
earnings / sales = gross profit
Gross earnings margin. The Rule Makers use
gross profit margin as a
screening criterion.
Selling, general and administrative (SG&A) Here is lumped other sorts
of costs that go into running
Advertising, research and development a business. SG&A is crucial for
the business to run, others like
Goodwill amortization advertising and R&D are
"optional" but important (one
Depreciation could cut R&D but eventually
there won't be any new products!)
Amortization
Goodwill amortization is often
Operating earnings lumped together with
depreciation. These non-cash
charges may or may not represent
"real" cash outlays.
Operating earnings/Sales =
"operating margin".
Other earnings Down here other sources of
earnings may be included. For
Extraordinary items example, interest income or
gains from sale of divisions
Income tax provision may be added here. Also here
is where taxes are accounted
Net earnings for.
Earnings per share - basic Diluted EPS is calculated from
- diluted assuming all outstanding
"in the money" options and
warrants are exercised.