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Income Statement (Definition) | Format You Must Know? - YouTube
Channel: WallStreetMojo
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clicking the bell icon friends are today
we have a topic to discuss which is
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income statement let's understand this
see this is the vital thing for any
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investor to understand what exactly is
income statement because that's where
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the old financial position so basically
what exactly the company is may the
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profits can be really determined the
income statement is one of the most
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important financial statement you can
say that it's a fin statement and
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investors need to look at if they want
to invest into any company so the
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primary purpose are looking at any
income statement of the company is to
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ensure that you know you get the whole
picture you get the whole picture of the
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company's income and expenses during the
your consolidated statement of operation
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of boxing as you can see what exactly
you know we know that the boxing has
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been making losses for the past 3
years as you can see the numbers over
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here in yellow so what does this tell us
about the company its business model its
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revenue generation capacity its control
and cost well here we are see in this
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tutorial we understand you know income
statement is the most important
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financial statement for the firm
financial analyst now first what is the
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income statement see income statement
our definition the basic purpose of
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looking at the income statement of the
company is to ensure that you know you
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get the whole picture you get the whole
picture of the company's income and
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expenses during the year I'm going to
show you over here this is Colgate
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Palmolive company's consolidated
statement of income and this is a
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snapshot what an income statement are
format is all about it should be
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actually so first an income statement is
based
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a statement which shows us how much the revenue it shows us you know how much the
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revenue company has earned or the past
year so revenue you over here means that
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you know the total sales over the period
total sales over the period and total
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sales is equal to units into price per
unit so Colgets the revenue in 2015 was
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well 16034 that was 16034 million
an income statement format you know it
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always shows you the cost in the
expenses that has been incurred during
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the year so this cost can directly or
indirectly affect the revenue of the
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company let's see what is the cost of
sales for 2015 well the cost of sales is
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6635 million in 2015 that means
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comparing the revenue and the cost an
income statement provides you a
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comparative analysis comparative
analysis of an income statement
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basically comparing the income say
provides you a comparative analysis of
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what mattered for a company during the
year how much the profit that is net
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profit they have earned if any or how
much net loss they have incurred and the
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net income of the colgets of 2015 which
was the net income of the Colgate that
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that should add 1384
over here the number is read to visible
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to us right so an income statement an
income statement format is also portrays
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the EPS that is the earning per share of
the company during the same period so
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the calculation is based on the
assumption that if the net earnings if
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the net earnings are also distributed
among the shareholders how much each
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shares would get priced and usually the
firm never distributes all the earnings
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so major major portions are reinvested
you can say they know there's a plowing
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back of profit so colgets basic
earning per share BEPS was 1.
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53 per share and according to
the SEC that is a security exchange
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Commission think of income statement as
a set of stairs the idea is to look at
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you know the revenue and the cost one by
one first we will look at the revenue
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and then the cost directly or indirectly
affecting the sale so and and then we
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will take the stairs and take interest
and taxes into account which will
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ultimately provide us with the net
profit or not
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so finally remember that you know the
ultimate net profit or net loss is
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called the bottom line and it is how
much our company earned and lost during
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the accumulated period and as an
investor you should also start from the
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top that is the revenue part and come
towards the bottom that is the net
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profit part or the net loss now I'm
going to show you the income statement
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format how it does exactly it works she
is in financial analyst you know we
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should look at the income statement
format very good the primary objective
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of analyzing income statement is to
understand how the business is
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generating recurring revenues in
contrast to its expense and whether the
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business is profitable or not so this is
the income statement format there's a
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revenue from the sales of goods
operating expenses that gives you
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operating from continuing operations
this is the key to the continued
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operations then there are recurring
income like interest in taxes and
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finance costs so that gives you your
recurring pre-tax income from continuing
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any unusual or non recurring items
pre-tax earning from the continuing
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operations any sort of income tax
expenses that you incur and then you get
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the net income then you have post facto
the discounted operation income from the
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discontinued operation or discounted
discontinued operations any
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extraordinary items and the cumulative
effect of the change finally you get the
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net income from the above so over here
this is the analysis analysts need not
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worry about this item below this one
because those are some of the
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extraordinary items and discontinued
operation that they usually do not take
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into consideration now this
in the revenue at the top of the income
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statement an accountant has to write the
total money that has been brought the
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total money that has been brought into
the account the company by the sales and
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it includes the total sales revenue also
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it includes the total sales revenue and
the total sales can be generated via you
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know selling the product or services
right so it is also called as the gross
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revenue gross means you know it has not
been refined gross means it has not been
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refined and in this case gross means you
know the expenses I yet to get deducted
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the next line would be you know the
unexpected item which company never
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expected while making the sales and it
can be like you know the sales return or
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sales discount so in the next line the
sales at or sales discount will be
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deducted which will provide us with
their net revenue part and that means
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this is the actual revenue the company
has earned after taking sales at or no
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sales discount in total well this for a
couple of details in relation to income
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statement but the basic ones that one
should know it as an analyst as an
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investor so as to be really well-versed
with the data in the final analysis I
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would say that you know the income
statement is one of the most important
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financial statement investors should
look at before they make a decision to
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invest into the company and if we want
to invest in a company we can use the
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vertical and horizontal analysis of the
income statement to make informed
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decisions so that's it for this
particular topic if you have learned and
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