What Are the Best Tips for Preparing an Income Statement of a Merchandising Company?

The income statement is a financial statement that reflects the operating results of an enterprise in a certain accounting period. There are currently two types of profit statement formats commonly used internationally: single-step and multi-step. The one-step method is to add the total income of the current period, and then add the total amount of all the expenses to calculate the current income at one time. Its characteristic is that the information provided is original data for easy understanding; the multi-step method is to combine various profits The multi-step calculation method to obtain the net profit is convenient for users to compare and analyze the operating conditions and profitability of the enterprise. ^[1]

Income statement

The income statement is a financial statement that reflects the operating results of an enterprise in a certain accounting period. There are currently two types of profit statement formats commonly used internationally: single-step and multi-step. The one-step method is to add the total income of the current period, and then add the total amount of all the expenses to calculate the current income at one time. Its characteristic is that the information provided is original data for easy understanding; the multi-step method is to combine various profits The multi-step calculation method to obtain the net profit is convenient for users to compare and analyze the operating conditions and profitability of the enterprise. ^[1]

The income statement is an accounting statement that reflects the production and operation results of a company in a certain accounting period (such as monthly, quarterly, semi-annual or annual). The operating results of an enterprise in a certain accounting period may be shown as profit or loss. Therefore, the income statement is also called the income statement. It comprehensively reveals the various incomes, expenses, costs or expenditures incurred by the enterprise in a particular period, as well as the profits or losses incurred by the enterprise.

The income statement is based on the basic relationship of "income-expense = profit"

The income statement, also known as the income statement, is an accounting statement that reflects the company's operating results and its distribution in a certain accounting period. It is a financial record of the company's operating performance over a period of time and reflects the sales revenue and cost of sales during that period. , Operating expenses and tax status, the results of the statements are the profits realized or losses incurred by the company. ^[3]

The income statement can reflect the income realization of the company in a certain accounting period, that is, the realized

(1) It does not include much information that is good for business development and financial status.

(2) The value of profit or loss is often affected by the accounting method used.

(3) The profit and loss measurement will be affected by the estimation.

The comparison of the income statement and the balance sheet is as follows:

1. The income statement is based on "income-expense = profit"

1. Price-to-sales ratio: Relative to the price-earnings ratio, this indicator is the ratio of the market value of a listed company's stock to the company's sales revenue. Some private equity companies have done a tracking model and studied the influence of the listed company's P / E ratio and P / S ratio on the stock price fluctuations. It was found that the P / E ratio is more reliable than the P / E ratio. According to foreign statistics, a market-to-sales ratio equal to 1 is usually the most appropriate. In this indicator, sales revenue is the most important. If a company's sales revenue continues to increase but its profits do not increase, the value of the company will need to be revalued. Under normal circumstances, companies first improve their income and then increase their profits, so income is more real than profit, the P / E ratio is more effective than the P / E ratio, and the ratio of income to profit reflects the status of the enterprise more quickly.

2. Gross profit margin: To track the changes in the gross profit margin of a stock, it is necessary to understand the historical situation of the stock. In general, neither gross margins (except for monopoly industries) nor excessively low gross margins will persist. Therefore, if a company has stable performance with a very low gross margin, once the price rises, the increase in profits will be very obvious. Conversely, if the gross profit margin is too high, then once the price falls, the decline in profits will also be very obvious. From this perspective, corporate performance has stabilized, and industries with stable gross margins are even more sought after by investors.

3 Three fee manipulation: The so-called three fees refer to selling expenses, management expenses and financial expenses. In theory, sales expenses are difficult to manipulate, and management expenses are easier to manipulate. "Accumulation" is a common tactic used by enterprises to manipulate management expenses. For example, if a company accrues greening fees and welfare fees, some companies accrue bad debt losses, and some companies accrue asset impairment provisions, all of which will be included in management costs. Most of these accruals do not affect tax payment, but they can conceal part of the company's profits.

"Accumulation" may also increase corporate profits. For example, a steel company made a large asset impairment or bad debt provision for an asset. However, if the market price of this asset suddenly rises after a certain period of time, or the payment is fully recovered, then the company's chargeback of the accrued expenses will naturally increase the current profit significantly.

A good company generally keeps the three costs relatively stable. The period expenses of a normal enterprise should change in proportion to sales income and maintain a reasonable rate of increase. If a company's three expenses do not increase at the same time as it expands, it means that the company has fully explored ways to reduce expenses and has achieved results. In this regard, this company has value.

4 Ultimate net profit: We all know that the main business income minus the main business cost is the main business profit; and the main business profit minus three fees, you can get the operating profit; use the operating profit plus or minus other income and then add You can get the profit before tax by reducing investment income; you can get the net profit by subtracting the income tax from the profit before tax; finally, you subtract the minority shareholders' equity from the net profit. The result is the ultimate net profit attributable to the parent company.