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    9 Income STMT

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    Kamal Kannan G
    The document provides an overview of financial statements, focusing on the income statement. It discusses the following key points: 1. The income statement reports a company's revenues, expenses and profits over a period of time. It shows whether the core business is generating money. 2. Important metrics include gross margin, net margin, earnings per share, and comparing metrics to competitors and prior years. 3. Reviewing an example income statement for FactSet, it shows revenues growing and margins improving from 2001 to 2002, indicating the business is performing better.

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    9 Income STMT

    Uploaded by

    Kamal Kannan G
    4 views20 pages
    The document provides an overview of financial statements, focusing on the income statement. It discusses the following key points: 1. The income statement reports a company's revenues, expenses and profits over a period of time. It shows whether the core business is generating money. 2. Important metrics include gross margin, net margin, earnings per share, and comparing metrics to competitors and prior years. 3. Reviewing an example income statement for FactSet, it shows revenues growing and margins improving from 2001 to 2002, indicating the business is performing better.

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    The document provides an overview of financial statements, focusing on the income statement. It discusses the following key points: 1. The income statement reports a company's revenues, expenses and profits over a period of time. It shows whether the core business is generating money. 2. Important metrics include gross margin, net margin, earnings per share, and comparing metrics to competitors and prior years. 3. Reviewing an example income statement for FactSet, it shows revenues growing and margins improving from 2001 to 2002, indicating the business is performing better.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    4 views20 pages

    9 Income STMT

    Uploaded by

    Kamal Kannan G
    The document provides an overview of financial statements, focusing on the income statement. It discusses the following key points: 1. The income statement reports a company's revenues, expenses and profits over a period of time. It shows whether the core business is generating money. 2. Important metrics include gross margin, net margin, earnings per share, and comparing metrics to competitors and prior years. 3. Reviewing an example income statement for FactSet, it shows revenues growing and margins improving from 2001 to 2002, indicating the business is performing better.

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    Download as ppt, pdf, or txt
    of 20

    Financial Statements

    The Income Statement


    Crow River Investment Club www.bivio.com/crowriver

    Introduction to this Series


    This is first of 4 short overviews 3 Main Financial Statements:
    Income Statement Balance Sheet Cash Flow Statement

    Finally, Annual Report Worksheets


    By Bob Adams By Paul Schneider

    Income Statement: The Basics


    1. Financial analysis is about Comparison. Thats why these statements all come with more than one year of data. 2. The Income Statement (or Profit & Loss Statement) reports the income, expenses and profits for a specific period of time.

    Income Statement: The Basics


    3. Product Companies report Net Sales 4. Service Companies report Net Revenues. 5. Net Sales & Revenues are the same thing. 6. Net means after the return of defective products.

    Income Statement: The Basics


    7. Everything on the Income Statement can be expressed as a percentage and compared to competitive companies. 8. Everything on the Income Statement can be compared as a percentage to Net Sales or Revenues.

    Income Statement: The Basics


    9. Companies are valued based on the cash produced from core operations (or Operating Income). 10.Focus your attention on the core business. What business is the company in? How much money did that business generate or cost?

    Income Statement: The Basics


    11.Finally, be aware of income and expenses that are not generated from the core business. 12.If a company restructures, or takes onetime gains and losses annually, they are no longer one time, are they??

    The Anatomy of an Income Statement


    Net Sales or Revenues - Cost of Goods Sold = Gross Profit Gross Profit divided by Sales = Gross Margin, the percentage of every dollar it costs to produce sales.

    Comparing Business Models


    Lets compare Mentor (MNTR) with Factset (FDS) 2002 annual figures: MNTR $321,062 $130,455 $190,607 59% FDS $205,853 $ 67,947 $137,906 67%

    Net Sales Cost of Sales Gross Profit Gross Margin

    Which one has a more profitable business model?

    Whats Next?
    Other Operating Expenses, such as:
    Utilities Labor Costs Advertising

    Then, Other Income & Expenses, such as:


    Short-term Investments Royalties on Patents Payment on a Lawsuit Foreign Exchange Rate deficit Interest Income & Expenses

    The Anatomy of an Income Statement


    SO Gross Profit - SG&A Expenses + Other Income - Other Expenses = Income Before Income Taxes This is an important SSG figure!

    Taxes?
    Why do we look at pre-tax income?
    Companies have no control over taxes Taxes vary from state to state Taxes dont show the true picture Various industries are taxed differently Tax credits skew year-to-year earnings

    Taxes have their own line on the Income Statement.

    The Anatomy of an Income Statement


    So Income Before Taxes - Provision for Income Taxes = Net Income

    The Anatomy of an Income Statement


    And
    Net Income divided by Shares Outstanding = Earnings Per Share or EPS Diluted Earnings Per Share: The value of each share after the effects of stock options and convertible shares and bonds have been taken into consideration.

    Income Statement Ratios


    Which Ratios are Important? Gross Margin: Sales Cost of Sales div. by Sales
    How profitable is this business model? Is it more profitable than its peers? Is it getting more profitable from year-to-year?

    Income Statement Ratios


    Which Ratios are Important? Net Margin: Net Income divided by Net Sales
    Is there any money left over for the shareholders after all expenses and taxes are paid? Is Net Margin growing from year-to-year? How does it compare to its competitors?

    Income Statement & the SSG


    Sales These are the items required on the Quarterly - Cost of Goods Sold Data Update Screen & - SG&A Expense PERT Report +Other Income - Other Expenses = Income Before Taxes - Income Taxes = Net Income (div. by Shares Outstanding) = Earnings Per Share (EPS)

    A Quick Look at FactSet


    2002 Commissions Cash Fees Total Revenue Cost of Services SG&A Expenses Total Op. Expenses Net Income Diluted EPS Shares Outstanding $ 62,196 $143,657 $205,853 $ 67,947 $ 75,084 $143,935 $40,848 $ 1.17 34,862 2001 $ 56,462 $120,226 $176,688 $ 61,576 $ 64,209 $125,785 $ 33,401 $ .96 34762 Change + 10% + 19% +16.5% + + + + + 10% 17% 14% 22% 22% 0%

    A Quick Look at FactSet


    2002 Total Revenue - Cost of Services Div. By Revenues = Gross Margin Net Income Div. By Revenue = Net Margin $205,853 $ 67,947 $137,906 67% $ 40,848 $205,853 19.8% 2001 $176,688 $ 61,576 $115,112 65% $ 33,401 $176,688 18.9%

    Are they getting better!!?

    Next Month: The Balance Sheet


    The End

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