Income Statement Flashcards
What is Gross Profit?
Revenue - COGS
What is Gross Margin?
Gross profit / Revenue
What are operating expenses and the 3 typical splits?
Any expenses incurred as a result of performing normal business operations. S,G&A, Advertising and marketing, R&D.
What is Other income?
Income not core to the business, therefore not considered to be revenue
What is income from non-controlling interests?
When company A invests in company B and company B distributes a portion of portion of its net income to company A.
What is EBITDA equation?
Revenue - COGS - Operating expenses + Other income (Sometimes OI not included if not consistent/recurring).
EBIT + D & A
What is EBITDA margin?
EBITDA / Revenue
Difference between Depreciation and Amortization?
Depreciation is for the aging/depletion of fixed assets whereas Amortization is for intangible assets (e.g IP/goodwill/copyrights).
What is EBIT equation?
EBITDA - Debt & A. EBIT = Revenue - COGS - SG&A.
What is EBIT margin?
Revenue / EBIT
Main types of interest?
Interest Expense (on any debt borrowed) and Interest income (e.g Savings/CD/investments)
What is EBT?
EBIT - Net interest
EBT margin?
EBT / Revenue
What is Net Income?
EBT - Taxes. (Although good practice to have a 2nd NI line item for NI - non-recurring events - distributions)
What are the 2 major types of distributions?
Payments in the form of dividends or non-controlling interest payments.
Basic share definition
Count of the number of shares outstanding in the market
Diluted share definition
Count of no. of shares outstanding in the market + any any shares that would be considered outstanding today if all option/warrant holders exercised (if in the money obviously).
Basic EPS + Diluted EPS equation
Net income (before dividends paid usually) / basic share no. Net income / diluted share no.
Why look at margin Analysis?
Margin analysis facilitates comparison between companies of different sizes (different to common size analysis)
What are the 3 key margins used to compare company performance?
Operating Margin / EBITDA margin and Net margin
Common size analysis?
Allows for comparison of two companies even though they have different absolute levels of revenue. We can benchmark companies by taking each line item of expenses as a % of total revenue.
How would one calculate Normalised EBIT?
You need to add back any one-off charges that don’t look likely to recur -> EBIT + one off/non recurring charges. Beware that the same items are no longer eligible for the tax deductions so that would need to be added back too.
What is ROCE formula?
ROCE = Operating income / Capital Employed
Capital employed?
Simply all of the financing (debt + equity) that the company has taken on in order to fund its operations.
ROA equation?
ROA = Net income / total assets. Could also be / average total assets or long term assets
