4 Types of

Income Statement
Analysis

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 How do YOU
want to analyze Income statements?

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 Main Point
1. Horizontal Analysis
2. Vertical Analysis
3. Trend Analysis
4. Top-line & Bottom-line
Analysis

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 Horizontal Analysis
Compare financial data 💲
over a period of time 🕕, usually
multiple years 📊,
to identify trends 📈, changes, or
growth in a company's financial
performance 👍

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 Horizontal Analysis
Horizontal
Analysis Amount in Comparison Year Amount in Base Year
(Absolute)

Horizontal Amount in Comparison Year Amount in Base Year

Analysis ________________________________________________________ 100
(%) Amount in Base Year

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 Horizontal Analysis
Assess Growth: Growth of a company's
revenue and net income over time.
Compare Performance: Compare the
company's performance to that of its
competitors or the industry as a whole
Monitor Changes: Monitor changes in the
company's income statement over time

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 Horizontal Analysis
Income Statement

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 Horizontal Analysis
Income Statement
Sub-Totals Colors for +ve and –ve impact

Horizontal Analysis

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 Vertical Analysis
Compare financial data 💲
in a single period of time 🕕, usually
most recent period 📊,
to identify relevant important 📈 of
different items on the income
statement

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 Vertical Analysis
Vertical
Analysis Income Statement Items
___________________________________________________ 100
(Income Total Sales
Statement)

Vertical
Analysis Balance Sheet Items
___________________________________________________ 100
(Balance
Sheet) Total Assets (Liabilities)

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 Vertical Analysis
Identify Cost Drivers: Identify the major
cost drivers for a company, as well as their
impact on the company's overall
Identify Revenue Drivers: Identify the key
revenue drivers for the company, such as
specific products or services.
Identify High/Low Cost Items: Identify
items that have a high or low impact on
the company's profitability.

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 Vertical Analysis
Income Statement

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 Vertical Analysis
Income Statement
Total Revenue as BASE

Vertical Analysis

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 Trend Analysis

Evaluate a company’s
financial performance 📊
by examing 🔎 changes over
time,
Usually over a period of
several years 📅

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 Trend Analysis
Identify Cost Drivers: Identify the
major cost drivers for a company, as
well as their impact on the company's
overall
Identify Revenue Drivers: Identify the
key revenue drivers for the company,
such as specific products or services.
Identify High/Low Cost Items: Identify
items that have a high or low impact
on the company's profitability.

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 Trend Analysis

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 Trend Analysis

Show complete Trend

Colors for High and Low Values

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 Top-line and Bottom-line Analysis
Top line analysis is a method of
evaluating a company's financial
performance 📊 by focusing 🔎
on the revenue section of the
income statement.
Bottom line analysisis a method of
evaluating a company's financial
performance by focusing 🔎 on
the net income or net profit
section 📈 of the income
statement

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 Top-line Analysis
Evaluate Market Share: Evaluate the
company's market share, and determine
whether it is gaining or losing market
share relative to its competitors.
Optimize Pricing Strategy: Optimize your
pricing strategy by identifying which
products or services generate the most
revenue and which have the highest profit
margins.
Identify Customer Trends: Identify
customer trends, such as changes in
customer behavior or preferences

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 Bottom-line Analysis
Monitor Financial Health: Monitor the
financial health of the company by
providing insight into its profitability and
its ability to remain sustainable over time.

Evaluate Profit Margins Evaluate the :

company's profit margins, and determine

whether it is achieving a healthy return on
investment.
Decision-Making: Provides valuable
information for decision-making by
management, investors, and analysts

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 Top-line and Bottom-line Analysis

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 Top-line and Bottom-line Analysis

Colors for +ve and –ve

impact

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