The income statement explains how revenue becomes operating profit and ultimately profit attributable to shareholders.
Read top to bottom
Start with revenue, then operating costs, operating profit, depreciation, finance cost, tax and profit after tax.
Margins
Calculate operating and PAT margins and compare their trends with revenue growth.
One-offs
Identify exceptional gains/losses, asset sales, tax benefits and other income before judging recurring profitability.
Cross-check
Use the cash-flow statement and balance sheet to test whether reported earnings are supported by cash and sensible working-capital movements.
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