The saying “Truth will eventually come to light” holds true when analyzing income statements. Behind the seemingly dry numbers lies a complete picture of a company’s financial health, operations, and growth potential. So, how do you decipher the “heart” of a business through its income statement? Let XEM BÓNG MOBILE guide you through the secrets of vertical income statement analysis!
Analyzing Income Statements: From “Overview” to “Details”
From “Overview” to Understanding the Big Picture
Start with the “Overview” section of the report, paying close attention to key indicators such as revenue, profit, net profit, and expenses. By grasping the changes compared to the same period last year, you’ll gain a comprehensive view of the company’s business situation.
For instance, strong revenue growth indicates that the business is operating effectively and is well-received by the market. Conversely, if net profit declines, you need to investigate the reasons, which could be due to increased production costs, intense competition, or business operational difficulties.
“Details” to “Thorough Understanding”
After grasping the “big picture,” “zoom in” on each detailed item in the report.
Financial expert Nguyen Van A in the book “Secrets to Understanding Financial Statements” advises: “Analyze cash flow, balance sheets, and income statements to gain a holistic view of a company’s operations. Pay attention to unusual items, as they may be signs of data manipulation, financial fraud, or a particular business strategy.”
Reading Income Statements Like “Reading Psychology”
The income statement is like a company’s “heartfelt letter,” reflecting their thoughts, strategies, and goals.
Imagine “reading the psychology” of a soccer player. When they score a goal, you know they are happy and confident. But when they receive a red card, you know they are angry and disappointed.
Similarly, when reading an income statement, you also need to “read the psychology” of the business. Pay attention to expense lines, investments, and changes in organizational structure. This will help you better understand the challenges, opportunities, and development direction of the business in the future.
Detailed Schedules: Watching the “Results” of the Business
Income statements are typically released quarterly or annually. Following the detailed schedule will help you track the “results” of the business in each period.
For example, if a company releases its Q1 2023 income statement, you can compare it to Q1 2022 to clearly see the changes and make judgments about the company’s future.
Predicting Scores: “Grasping” Development Trends
Based on the analysis of the income statement, you can predict the “score” for the company’s “match” in the future.
For example, if a company is growing strongly, profits are increasing, and investments are being made in potential projects, you can predict that they will continue to succeed in the future. Conversely, if a company is facing difficulties, profits are declining, and there is a lack of development strategy, you can predict that they will face many challenges in the near future.
Mentioning Brands: “Honoring” Excellent Businesses
Analyzing income statements is not just about “reading” information, but also an opportunity to “honor” excellent businesses.
For example, Vingroup Corporation is one of Vietnam’s leading businesses, consistently delivering impressive income statements. Analyzing Vingroup’s reports will help you better understand the business strategy, management capabilities, and growth potential of this corporation.
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