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.