7 Types of
Income Statement
Analysis
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How do YOU
want to analyze Income statements?
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Main Point
1.
Horizontal Analysis
2.
Vertical Analysis
3.
Trend Analysis
4.
Top-line & Bottom-line Analysis
5.
Variance Analysis [Table]
6.
Variance Analysis [Big Numbers]
7.
Variance Analysis [Waterfall]
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Horizontal Analysis
Compare financial data 💲
over a period of time 🕕, usually
multiple years 📊,
to identify trends 📈, changes, or
growth in a company's financial
performance 👍
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Horizontal Analysis
Horizontal
Analysis
(Absolute)
Horizontal
Analysis
(%)
Amount in Comparison Year
Amount in Base Year
Amount in Comparison Year Amount in Base Year
________________________________________________________
Amount in Base Year
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100
Horizontal Analysis
Assess Growth: Growth of a company's
revenue and net income over time.
Compare Performance: Compare the
company's performance to that of its
competitors or the industry as a whole
Monitor Changes: Monitor changes in the
company's income statement over time
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Horizontal Analysis
Income Statement
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Horizontal Analysis
Income Statement
Sub-Totals
Colors for +ve and –ve impact
Horizontal Analysis
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Vertical Analysis
Compare financial data 💲
in a single period of time 🕕, usually
most recent period 📊,
to identify relevant important 📈 of
different items on the income
statement
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Vertical Analysis
Vertical
Analysis
(Income
Statement)
Vertical
Analysis
(Balance
Sheet)
Income Statement Items
___________________________________________________
Total Sales
Balance Sheet Items
___________________________________________________
Total Assets (Liabilities)
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100
100
Vertical Analysis
Identify Cost Drivers: Identify the major
cost drivers for a company, as well as their
impact on the company's overall
Identify Revenue Drivers: Identify the key
revenue drivers for the company, such as
specific products or services.
Identify High/Low Cost Items: Identify
items that have a high or low impact on
the company's profitability.
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Vertical Analysis
Income Statement
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Vertical Analysis
Income Statement
Total Revenue as BASE
Vertical Analysis
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Trend Analysis
Evaluate a company’s
financial performance 📊
by examing 🔎 changes over
time,
Usually over a period of
several years 📅
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Trend Analysis
Identify Cost Drivers: Identify the
major cost drivers for a company, as
well as their impact on the company's
overall
Identify Revenue Drivers: Identify the
key revenue drivers for the company,
such as specific products or services.
Identify High/Low Cost Items: Identify
items that have a high or low impact
on the company's profitability.
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Trend Analysis
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Trend Analysis
Show complete Trend
Colors for High and Low Values
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Top-line and Bottom-line Analysis
Top line analysis is a method of
evaluating a company's financial
performance 📊 by focusing 🔎
on the revenue section of the
income statement.
Bottom line analysisis a method of
evaluating a company's financial
performance by focusing 🔎 on
the net income or net profit
section 📈 of the income
statement
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Top-line Analysis
Evaluate Market Share: Evaluate the
company's market share, and determine
whether it is gaining or losing market
share relative to its competitors.
Optimize Pricing Strategy: Optimize your
pricing strategy by identifying which
products or services generate the most
revenue and which have the highest profit
margins.
Identify Customer Trends: Identify
customer trends, such as changes in
customer behavior or preferences
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Bottom-line Analysis
Monitor Financial Health: Monitor the
financial health of the company by
providing insight into its profitability and
its ability to remain sustainable over time.
Evaluate Profit Margins Evaluate the
company's profit margins, and determine
whether it is achieving a healthy return on
investment.
:
Decision-Making: Provides valuable
information for decision-making by
management, investors, and analysts
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Top-line and Bottom-line Analysis
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Top-line and Bottom-line Analysis
Colors for +ve and –ve
impact
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Variance Analysis [Table]
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Variance Analysis [Table]
Top Line
Comparative Figure
Variance
Sub-Totals
Colors
for +ve
and –ve
Increase
Bottom Line
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Variance Analysis [Big Numbers]
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Variance Analysis [Big Numbers]
Trend
Big Number
Variance
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Variance Analysis [Waterfall]
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Variance Analysis [Waterfall]
Top Line
Sub-Totals
Colors for +ve
and –ve
Increase
Bottom Line
Waterfall Chart
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Waterfall Chart
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