Financial Statement 101: What is Income Statement? | Brian Feroldi posted on the topic | LinkedIn (2024)

Another great graphic full of useful information about your financial statements from Brian Feroldi. This one is all about the income statement. Why is it important?- Measures financial performance.- Provides insights into profitability.- Helps with decision-making and budgeting.- Demonstrates the ability to generate profit.

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Income Statement review is very key in financial management as its the measure of financial performance of a company's profitability which in turn helps decision makers make informed startegic decisions.#financialmanagement #financialliteracy

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When doing financial statement analysis the income statement shows the company’s revenues, expenses, and net income for an accounting period. Hence, this step includes evaluating the revenue trends, gross profit margin, operating profit margin, and net profit margin. Compare these figures with industry benchmarks or historical data to assess the company’s profitability.

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How the Income Statement + Balance Sheet link 🔄The three primary financial statements connect.📃 Income statement:Shows a company's revenue, expenses, and net income over a period of time (month, quarter, year).📃 Balance sheet:Shows a snapshot of a company's assets, liabilities, and equity at a specific point in time (March 31st, 2023).🏭 Tangible assets (you can touch them) on the balance sheet are depreciated as operating expenses over the useful life of the asset.📜 Some intangible assets (you can't touch them) on the balance sheet are amortized as operating expenses over the useful life of the asset.➖ Both depreciation and amortization costs are subtracted as operating expenses on the income statement.❌ Financial assets that generate expenses (interest payments on debt) or losses (stock value falls) are subtracted as non-operating expenses on the income statement.💰 Financial assets that generate income (cash generates interest) or profit (stock appreciates) are added as non-operating income on the income statement.➕ Net income generated on the income statement is added as retained earnings on the equity side of the balance sheet.Understanding how the three financial statements link is crucial to getting gaining a comprehensive view of a company's financial health.FollowLong Term Mindset for more content like this.***Want to master the basics of accounting (for free)?Enroll in our free, 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) →https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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Understanding financial statements is crucial for effective planning and budgeting. By analyzing past performance, you can identify trends, patterns, and areas of improvement, enabling you to set realistic goals and create accurate budgets. Financial statements help you determine revenue targets, expense controls, and allocate resources appropriately, which contributes to your business' long-term growth and success.#virtualbookkeeper #budgeting #books&budget #businessplanning

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Profit and Loss (P&L) Statement in 5 Minutes.The P&L statement, also known as the income statement or statement of operations, is a financial report that summarizes a company's revenues, expenses, and profits over a specified period, typically a quarter or a fiscal year. It serves as a snapshot of a company's financial performance, revealing its ability to generate income and manage expenses.𝐃𝐞𝐜𝐨𝐝𝐢𝐧𝐠 𝐭𝐡𝐞 𝐂𝐨𝐦𝐩𝐨𝐧𝐞𝐧𝐭𝐬The P&L statement is structured into three main sections:1. Revenue Section: Details the company's income generated from the sale of goods or services.2. Expense Section: Outlines the various costs incurred by the company to generate revenue, including Cost of Goods Sold (COGS) and Operating Expenses.3. Profit Section: Calculates the company's profit or loss for the specified period, including Gross Profit, Earnings Before Interest and Taxes (EBIT), and Net Income.𝐓𝐲𝐩𝐞𝐬 𝐨𝐟 𝐏&𝐋 𝐒𝐭𝐚𝐭𝐞𝐦𝐞𝐧𝐭𝐬: 𝐔𝐧𝐯𝐞𝐢𝐥𝐢𝐧𝐠 𝐕𝐚𝐫𝐢𝐚𝐭𝐢𝐨𝐧𝐬1. Single-Step P&L Statement: Offers a simplified view, combining operating expenses into a single line item.2. Multi-Step P&L Statement: Provides a more detailed breakdown of operating expenses, categorizing them for granular analysis.3. Comparative P&L Statement: Presents a side-by-side comparison of financial performance across periods, highlighting trends and changes.Harnessing the Power of P&L Analysis𝐄𝐟𝐟𝐞𝐜𝐭𝐢𝐯𝐞𝐥𝐲 𝐚𝐧𝐚𝐥𝐲𝐳𝐢𝐧𝐠 𝐭𝐡𝐞 𝐏&𝐋 𝐬𝐭𝐚𝐭𝐞𝐦𝐞𝐧𝐭 𝐢𝐧𝐯𝐨𝐥𝐯𝐞𝐬:1. Identifying Trends: Analyze changes in revenue, expenses, and profits over time to identify patterns and trends.2. Comparing to Industry Benchmarks: Evaluate the company's performance against industry averages to assess its relative financial health.3. Calculating Ratios: Calculate key ratios, such as gross profit margin, operating profit margin, and net profit margin, to assess profitability.E̳m̳p̳o̳w̳e̳r̳ ̳Y̳o̳u̳r̳ ̳F̳i̳n̳a̳n̳c̳i̳a̳l̳ ̳E̳x̳p̳e̳r̳t̳i̳s̳e̳✅𝐃𝐨𝐰𝐧𝐥𝐨𝐚𝐝 𝐭𝐡𝐢𝐬 𝐜𝐨𝐦𝐩𝐫𝐞𝐡𝐞𝐧𝐬𝐢𝐯𝐞 𝐏&𝐋 𝐬𝐭𝐚𝐭𝐞𝐦𝐞𝐧𝐭 𝐜𝐡𝐞𝐚𝐭 𝐬𝐡𝐞𝐞𝐭 𝐢𝐧 𝐏𝐃𝐅 𝐟𝐨𝐫𝐦𝐚𝐭 𝐛𝐲 𝐯𝐢𝐬𝐢𝐭𝐢𝐧𝐠 𝐦𝐲 𝐩𝐫𝐨𝐟𝐢𝐥𝐞.🤝 This is how you can help me create more content: Like, Share, Comment, Follow#fpacareer#finance #financialanalysis #profitandloss

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Great resource for people to review the Income Statement, Balance Sheet and Cash Flow Statements.I find that a large number of managers in the industry I work in are usually blissfully unaware of the parameters on each of these. They stop focusing after reviewing their own P&L numbers. It’s imperative to understand how business performance is captured and reflected in the three statements !

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Great guide about how to analyze financial statements and look for the green flags.

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Financial Statements Green Flags INCOME STATEMENT 📜 →Accelerating Revenue Growth→Gross Margin Expansion→Operating Expenses Growing Slower Than Revenue→Operating Margin Expansion→Interest Income Exceeds Interest Expense→Pre-Tax Margin Expansion→Income Tax Rate Near 21%→Net Income Grows Faster Than Revenue→Shares Outstanding Declines→Earnings Per Share Consistently GrowsBALANCE SHEET 📜 →More Cash Than Debt→No Accounts Receivables→No Inventory→Goodwill Less Than 10% of Total Assets→Current Liabilities Less Than Cash→No Short-Term or Long Term Debt→Deferred Revenue→No Preferred Stock→Retained Earnings Positive & Growing→Treasury StockCASH FLOW STATEMENT 📜 →Net Income Positive & Growing→Stock-Based Compensation Less Than 10% of Net Income→Operating Cash Flow Higher Than Net Income→Capital Expenditures Less Than 10% of Net Income→Free Cash Flow Higher Than Net Income→Stock Repurchase→Dividends Paid→Cash Balance IncreaseWhat "green flags" do you look for in financial statements? Let me know below!---P.S. Want to master financial statements analysis? Join me in November for my cohort-based course, Advanced Financial Statement Analysis.Details here:https://lnkd.in/eun5RHr9Interested? Send me a direct message for a coupon code.If you found this post useful, please repost ♻️ to share with your audience.

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