1 CPE Managers in a sample of managers at companies with at least 150 employees took a simple financial literacy quiz and got an average of 38% of the questions right. How is that possible? There are varying reasons, but none of them are good. For those who have had limited exposure, or just a plain aversion to "the numbers", there is hope for becoming financially intelligent and increasing your credibility by speaking the language of business. This involves knowing the foundation of financials – getting back to basics.
This is part one of a four part Back to Basics in Corporate Finance series. This module focuses on the finance tool that managers look at the most when analyzing a company’s numbers – the income statement. You may have heard other names used for this statement, such as the statement of operations, consolidated statement of operations, profit & loss (P&L) statement, and statement of earnings. Don’t let all the jargon confuse or intimidate you. Get to know the terms and elements of this statement, step by step, and how you can affect the bottom line. Discover where to look for assumptions and estimates, and how a company measures revenue and expenses. Calculate key ratios to learn more about a business and whether it’s growing or shrinking its worth.
Discussions include:
- All the financial jargon and terminology used to say virtually the same thing.
- How to analyze revenue growth and recognition using real company numbers.
- How finance professionals use the matching principle to estimate profit.
- The difference between EBIT (earnings before interest and taxes) and EBITDA (earnings before interest, taxes, depreciation, and amortization).
- Why Warren Buffet believes cash is king.
When you know how to read an income statement, you will understand the story the financials are telling you. This training is filled with entertaining stories about real companies, and their cautionary tales of why they failed or succeeded.
Course Series
This course is included in the following series:
Learning Objectives
- Identify the assumptions and estimates in an income statement
- Discover key measures used to determine profitability of a company
- Explore the ratios to see if your company is growing or declining
32 Reviews (102 ratings)
Reviews
View Instructor Profile
Prerequisites
No Advanced Preparation or Prerequisites are required for this course.
Education Provider Information
Course Questions and Answers(10 Questions)
About Illumeo
Platform
Resources
Contact Us
- Email: info@illumeo.com
- Phone: 408-400-3993
- Adress: 1608 W Campbell
- Av #221, Campbell, CA 95008
© 2024 Illumeo, Inc.
It is my understanding, from a planning process standpoint, the budget comes before the income statement. That is, the budgeted data in the income statement's line items come from the line items in the budget, appropriately rolled up into the income statement's line items. Right?
Yes that is correct, a budget is just a plan so a budgeted income statement is a planned income statement.
Joe,
Another question if I may. How, specifically, are income statements updated during the year? A classic example would be if the client has adopted "rolling forecasts" where every quarter a new/updated 4 quarters of forecasts are available. Thanks.
Alan,
If it's a public company they are required to produce quarterly as well as annual income statements. Private companies can choose the frequency of releasing their income statements. You should find the details to know what period you are viewing at the top of each income statement. Typically they are released quarterly and annually but some do a trailing 12 month (TTM) or monthly. Forecasts are typically shown in budgets rather than an income statement and that should also be listed at the top so that you know what they are looking at.
Joe
Joe,
Thanks. However, I mis-communicated. I was not asking the question apropos income statements as actuals; rather income statements as plans and how those plans are updated when key assumptions change. I gave as an example how is the income statement updated when the forecast changes mid year for the rest of the year or every quarter as the income statement is always 12 months ahead..
Alan , .
Alan,
Great question, here's how I'll answer it. It depends... (the standard accounting answer). The main thing you want to see in re-budgeted or re-forecasted statements are that they are consistent. Either they don't update and they live with the original forecast or they do it on a pre-described path. Don't do it quarterly one year and switch to monthly the next. Again at the top it should clearly state what you are looking at and might even compare it to the previously forecasted statement. Good accounting requires a consistent approach in actual and forecasted statements.
Joe
Joe,
I'd like to continue this discussion. However, I'd like to share an attachment or two. Any chance you could send me an email I could use? I hope so.
Mine is alan
optimizedincomestaterment [dot] com.
Thanks,
Alan
Alan,
business-literacy [dot] com.
Go ahead and email them to mail
Joe