@brianferoldi: How to analyze an income statement Ask these 11 questions: 1: Does revenue consistently grow? →Analyzing revenue trends over time can help assess the company's growth and stability. 2: What is the gross margin? →Gross margin, which is gross profit divided by revenue, indicates how efficiently the company manages its production costs. 3: Is the gross margin stable? Expanding? Contracting? Why? →Changes in the gross margin trend provide insights into the company's pricing power with consumers and cost control measures with suppliers. 4: Are there research + development expenses? →Research & Development expenses indicate the company's has to continuously innovate to drive future growth. 5: Are there selling + marketing expenses? →Big selling and marketing expenses indicate the company has to spend heavily to promote its products or services. 6: What are the company's biggest operating expenses? →Identifying the biggest expense, such as labor or cost of goods sold, can pinpoint the areas where cost management is critical. 7: What is the company's operating margin? →Operating margin, which is operating profit divided by revenue, measures how efficient a company is at converting revenue into profits. 8: Does the company have any non-operating expenses? →Looking for non-operating expenses like interest payments or one-time charges is essential for understanding the impact of financial activities outside the company's core operations. 9: What is the company's net profit margin? →Net profit margin, which is net profit divided by revenue, indicates the overall profitability of the company after all expenses. 10: Is the company profitable on a Non-GAAP basis? →Looking at non-GAAP profitability enables you tp understand if the company's profit picture differs when certain accounting adjustments are made. 11: Is the company profitable on a GAAP basis? →Assessing profitability on a Generally Accepted Accounting Principles (GAAP) basis provides insight into whether the company complies with standard accounting rules and is profitable within that framework. Follow @brianferoldi for more content like this #finance #finance101 #accounting #accountingstudent #investing

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Friday 04 October 2024 11:43:09 GMT