Summary of Understanding the Income Statement
(9 of 9)
Summary of Understanding the Income Statement
The corporate income statement provides the investor with much insight into a company’s revenues and expenses. You can identify where the company spends much of its income and compare that to similar companies. You can also compare a company’s performance with that of previous years. Most importantly, the income statement tells an investor whether the business is profitable and, if so, how profitable. If the company continually makes substantial profits, it indicates to bondholders that it is a stable company. The income statement provides many clues to how a company is operating and what its future holds. The savvy investor will compare income statements of similar companies.
Want to find the income statements of potential companies to invest in? They will be included in those companies’ annual reports.
Practical Ideas I Can Start with Today
- To obtain the annual report of a company in which you do not own shares, call the public relations (or shareholder relations) department of the company.
- Use the The EDGAR database to find annual reports of companies you are interested in.
- Find annual reports on The American Association of Individual Investors Website.
- To read the income statement of a company you already invest in, find it in the annual report that gets sent to you each year or, if you invest online, find it in the company profile.
What you have learned
- The Corporate Income Statement
- The Income Statement: Gross Profit on Sales
- The Income Statement: Operating Income
- The Income Statement: Earnings before Interest and Taxes
- The Income Statement: Net Earnings (or Loss)
- The Income Statement: Retained Earnings
- Income Statement Mnemonics
