What are the analytical elements of the income statement?
1 operating income: this is the most important source of income for most companies, and it is a new asset acquired by enterprises through selling products or providing services, usually in the form of cash or accounts receivable. It is of great significance to judge the investment value of the company. Generally speaking, the higher the operating income, the greater the proportion in the total income, and the more investment value the enterprise has.
2. Operating expenses: refers to the expenses incurred by an enterprise to obtain operating income. Among them, the largest proportion is generally the cost of sales, in addition to raw material consumption, wages and general expenses. The less the operating expenses, the lower the company cost, the greater the profit and the greater the investment value.
Profits: including pre-tax and after-tax profits. The profit before tax is determined by the difference between operating income and operating expenses. After deducting taxes from pre-tax profits and adjusting non-recurring items, the remaining profits are after-tax net profits. The higher the net profit, the stronger the company's profitability and the more worthy of attention.
According to the data provided by the income statement and other relevant information in the annual report, especially in the balance sheet, investors can analyze and judge the company's operating conditions and know whether the company's profits are reasonable. If there are any irregularities, investors need to be vigilant.