Income Statement Analysis-6


The income statement can also be broken down into its component parts and analyzed on a percentage basis.

Percentage Breakdown

Some of the principle items in an income statement, that could be expressed as a percentage of sales, for example, include:
  • Sales (100% in this example)
  • Cost of Sales
  • Gross Margin
  • Fixed Costs or Overhead
  • Net Income Before Interest and Taxes
  • Interest Expense and Financing Costs
  • Net Income Before Income Tax
  • Income Tax
  • Net After-Tax Income
By doing a comparative analysis based on percentages over different periods, you can see how the different components of the income statement are evolving.  Here again, graphs would be a useful visual tool.

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Quantitative Easing!!!

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