Revenue Questions
March 30, 2014 Leave a comment
This post is in continuation of these 2:Link.Link.
This post is on how to analyse the key revenue constituents of a profit and loss statement (P&L).
Some companies report the ‘total income’ earned by them within a year as ‘sales’. As an investor,its better for us if we take a company’s integral earnings or core operations only as sales and not the income that is generated from other operations. The latter could include items such income from sale of scrap, income from interest and dividends, forex gains, profit on sale of assets, export incentives and miscellaneous receipts, amongst others.While these items may not be a significant part of the total income, it is still a good practice to follow. In fact, it would be even better if we could further bifurcate such earnings under two heads – other operating income and other income. Details regarding total income are found in respective schedules.
Revenues are generated from sales of goods or services. For companies which have a presence in various businesses, it is a good practice idea to track the change in segment wise/ product wise / business wise revenues on a year on year basis. Look at how the income from each business segment (as a percentage of net sales) has changed over the years. This will give us a good idea how a company’s segments or businesses have been performing over a particular time frame. Read more of this post
“The market is like women, always commanding, always mysterious, always volatile, always exciting, and it is not a joke. In my 25-30 years of experience in the market, just as you cannot have a good relationship with a woman by bullying her, you cannot have a good relationship with the market by trying to bully it or say that you are the king. The king is the market.”
Stock investing, like cooking, cannot be taught, it has to be learned.
1.Be an optimist! The necessary quality for investing success.
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