Earnings and Loss Statements Read in 5 Steps: Basics of Profit Structure

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Income Statement is a table showing how many companies earn.

In this article, we will explain the flow from sales to final profit, and how to see important investments for beginners.

When viewing the profit and loss statement, it becomes easy to understand if you check the profit in the next five stages.

• Total revenue
• Operating income
• income
• Profit before tax
• Net income

In particular, operating income is important to indicate the power of real business.

What is the Income Statement?

Income Statement is a material that indicates the profit for a certain period.

In English, it is called Profit and Loss Statement.

In a word,

View the company's profit flow

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If the balance sheet sees the state of the property, the profit and loss statement confirms the power to earn.

The basic structure is:

Understand 5 benefits

Profit and loss statements have a step-by-step effect.

When you understand this, you can see where companies are making and where they are using costs.

1. Total revenue

The total profit of sales is the profit from the sales.

Also called coarse interest.

Total revenue = Net sales - Net sales

You can see the profit of the product and service itself when you see the total sales profit.

High-risk companies tend to be competitive in price.

For example, companies with brand power and unique technology are likely to have a higher interest rate.

2. Operating income

Operating income is the profit earned in the business.

We calculate sales and general management expenses such as advertising expenses, labor costs, rent, R&D expenses from total sales profit.

Operating income = Total income of sales - Sales and general management costs

This operating profit is especially important in investment.

This is because we can understand the competitiveness and profitability of our business.

In the event of an increase in sales and a decrease in operating income, there is a possibility that there is a cost increase or price reduction competition.

3. income

income is a normal profit, including the main business.

ulation of non-operating revenue and non-operating expenses for operating income.

For example, the following items are included:

• Receiving interest
• Payment
• idend
• Currency
• Loss

会社 income is also important for companies with high financial income and exchange impact.

For example, in companies with high overseas sales, ordinary income may move greatly depending on foreign exchange margin and foreign exchange loss.

4. Profit before tax

Profit before tax is the profit before法人 corporate tax.

ulation of special and special losses to ordinary income.

Special benefits and special losses may include:

• Land Sale
• Profit on sale of investment securities
• Disaster Loss
• Loss
• Business withdrawal loss

When you see the profit before taxation, check whether there is a temporary factor.

5. Net income

Net income is ultimately profit remaining to the company.

The profit after deducting taxes is also called final profit.

It is an important profit from the viewpoint of shareholders.

However, net income may include temporary profits and losses.

Therefore, it is important to check not only the net income, but also the operating profit and ordinary profit.

Operating income is important in investment

In investment, the trend of operating income is especially important.

This is because we understand the competitiveness of our business.

The following points are:

Companies with stable operating income may have strong power to earn the business.

What is operating profit ratio?

Operating profit ratio is the proportion of operating income to sales.

Operating Income = Operating Income ÷ Sales × 100

The higher the operating profit, the better the profit.

However, the standard depends on the industry.

For example, software companies are more profitable and retailers and wholesalers are less profitable.

Therefore, it is important that the operating profit ratio is compared to other companies.

Common misunderstandings

Reliable if sales increase

The profit may be decreased even if sales increase.

Price reduction, advertisement cost increase, raw material cost increase, labor cost increase, etc.

It is dangerous to judge only by sales growth.

See only the final profit

This、 year's net income is important, but it may move greatly due to temporary profit and loss.

For example, even if the net profit is increasing due to the sale of land, the business may be weakened.

To see the power of the business, check the operating profit together.

Make a difference in profit

Income due to special benefits is not guaranteed annually.

When determining the power of the company, it is necessary to see whether the profit can be earned continuously.

Do not compare profits

Not only profits but also profits.

Even with the same operating income of 100 billion yen, the profit is different from the company with a sales of 10 billion yen and a sales of 1 trillion yen.

You can see the efficiency of your business by looking at the profit margin.

See where profits are increasing and decreased

It is important in the income statement

Where profit is increased or decreased

It is to see.

For example:

In this way, you can see the corporate profit structure by seeing the flow from sales to net income.

View in a few years

Profit and loss statements are difficult to determine only one year.

It is easy to see changes in companies by 5 between 3 and 5 years.

The items you want to check are as follows:

• Sales
• Total revenue
• Operating income
• Operating income
• Net income

Find out if you’re continuously increasing your power from short-term increase or decrease.

• Profit and loss statements see the power of the company
• Make sure the profit is at 5 stages
• Business profit is especially important in investment
• See not only sales but also profit margin
• Thinking about the benefits of temporary factors and business
• Check the profit structure in a few years

First, let's compare the profit and loss statement of your company for 3 to 5 years.

In particular

1. Sales
2. Operating income
3. Operating income

Even if you look at these three changes, you can easily understand the power of your company.

Concept

The profit and loss statement is an intuitive table to see the flow of profit.

Text

• Main: Earnings Statement Read in 5 Steps
• Sub:営業 profit is really important

Color

• Navy White
• Orange

構成

• Left: Arrows flowing from sales to profit
• Central: Highlight operating income
• Right: Profit graph of right shoulder