How to read an Income Statement 101

I use this website

You can type in any company and it will display the financials.

Let's use Aveng of course
Red is bad. Black is good.

An Income Statement shows you if a company made profits or losses.

It contains all the income and all the expenses of the company
You start at the top with Revenue. This is the sales the company made. Think of it as the heart of any business. We all start a business to make sales.

You want this number to increase year on year, right???

Let's not worry about inflation now. This number must grow annually
Next line is Gross Profit. This is the profit you make from selling your product.

If you are selling bread, you deduct the ingredients like flour, salt and yeast.

Here you don't deduct the rent and salaries and stuff yet, We are just checking if your product is profitable.
Next line is net profit. This is now after all the expenses like salaries, rent, marketing etc
You see all those numbers at the bottom....Those are fancy stuff us accountants do because the accounting rules force us to. It means very little and it has no cash flow impact, so don't wreck your brain with it
When you look at Revenue, Gross profit and Net Profit, you must do these 3 things:

Compare it year on year
Compare it to the industry
Compare it to competitors

Sounds hard, but does it for you
Thank you for attending this short lesson.

Tomorrow we tackle the Balance Sheet📚📚📚
Sorry, sorry I forgot to tell you guys...

In accounting when you see LTM and NTM it means:

Last Twelve Months
Next Twelve Months

Companies have financial years which can be any 12 month period. Sometimes you wanna see last 12 months, instead of waiting for their year-end.

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More from @SoulFairy3

12 Aug
How to read financial statements 101

This is an income statement. It tells you if a company made profits or losses. Profits are black, losses are red.

So even if you are like Soul and you can't read...just look at colours okay
This is a balance sheet. This tell you the assets and liabilities. Sorry, here you need to read, but I will highlight the assets and liabilities okay.
This is a cash flow statement. It tells you if a company made cash or if they are eating up cash. Again, black is good. Red is bad.
Read 7 tweets
12 Aug
Something that I really struggled understanding for the longest time. Not sure how you guys feel?
An ETF is usually a passively managed index fund that trades on a stock exchange. I always tell people it is a basket of shares.

Lets say you buy the Satrix JSE Top 40. Satrix buys the actual shares of the Top 40 JSE companies and you own a piece of each.
ETF's are passive because they don't go buy and sell shares daily in there. If a company ie drops out of the JSE top 40, that's the only time Satrix will go and change the basket.
Read 10 tweets

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