Income Statement - Revenue

From the example of income statement below, we will focus on the “revenue”, where the money come into the company. Revenue is the income generated by selling its products or services.

However, it is insufficient to tell us that this company is earning or losing money. Then we will look into the expenses, where the money go out from the company on material purchasing, employee salaries, depreciation, etc. to maintain the company operations.

By deducting the expenses from the revenue, we will obtain the “Profit”, where showing the company is earning or losing money. This is important when choosing correct company before investment to be done. 

Sample of Income Statement from listed company

INCOME STATEMENT

In searching of good company, we will look through on the “Income Statement”, which reveal the company’s operation results for a set of period of time. It can be reported for each three month period and at the end of year which call “annual report”. Annual report normally will be audited by external party before published to the public.

In the income statement, there will be three items we can look for, which is “Revenue”, “Expenses”, and “Profit”. The profit obtained after we subtract the expenses from the revenue. Quite simple. A company with good profit that increase every year and consistently showing that this company is durable. We won’t buy any shares from company that its profit is not stable and sometimes will lose money. Would you buy this kind of company? Definitely no. Besides, increasing of profit in consistently will bring the market share price increasing also. This would mean that your capital will be increase together with dividend issue by the company! Sometimes the company can issue “special dividend”, sound good!

We need to bear in mind that when we look through the income statement, we need to get their annual report in a series of years to see the profit trend. This can let us know how good the company perform in these years. Normally 4 to 5 years will be nice. You can plot your graph and analyze the trend of profit if you tend to.