Financial Statement

PROFIT & LOSS STATEMENT-reveals the management of a company and how well $ is generated.

Profits VS Expenses- gross profit margin.
Gross Margin (profit margin) realates to EPS.
increase G.M. over past 5-10yrs-highly differentiated products & have strong competitive advantage against competitors, or vice versa.
Gross margin=gross profit/sales revenue x 100%= (sales revenue-cost of goods sold)/sales revenue x 100%.

Operating Income= sales revenue-cost of goods sold-operating expenses.
operating expenses includes R&D, marketing, salaries, depreciation etc.

Net Profit After Tax-dividends or retained earnings-company's value.
EPS= Net Profit After Tax/No. of shares outstanding.

PE ratio- no. of yrs to break even.

BALANCE SHEET- financial health of the company.
ASSET= LIABILITY+EQUITY.

STATEMENT OF CASH FLOW-company's profitability and stability.
Increase(decrease) in cash equivalents=operating cash flow+net cash from investing activities+ net cash from financing activities.
Free Cash flow= cash flow from operations-capital expenditures.
free cash flow/sales revenue > 5%, great company with lots of cash left over.