Comparative Income Statement (Examples, Analysis, Format)

4/23/23, 10:37 AM Comparative Income Statement (Examples, Analysis, Format)
Home » Investment Banking Resources » Financial Statement Analysis » Comparative Income

Statement
Comparative Income Statement

Article by Reviewed by
Ashish Kumar Srivastav Dheeraj Vaidya, CFA, FRM
A comparative Income Statement is the income statement in which

multiple periods of the income statement are dealt with and compared
side by side to allow the reader to compare the incomes from a previous
year and decide whether or not to invest in the company.
What is a Comparative Income

Statement?
A Comparative Income Statement shows the operating results for several
accounting periods. It helps the reader of such a statement to compare the
results over the different periods for better understanding and detailed
analysis of variation of line-wise items of Income Statement.
Comparative Income Statement format combines several Income

Statements as columns in a Single Statement, which helps the reader
analyze trends and measure the performance over different reporting
periods.
It can also be used to compare two different companies’ operating

metrics. Such Analysis helps in comparing the performance with another
business, which can analyze how companies react to market conditions
affecting the companies belonging to the same Industry.
Thus Comparative Income Statement is an essential tool through which

the result of operations of a business (or, say, the operation of the
business of different companies) over multiple accounting periods can
https://www.wallstreetmojo.com/comparative-income-statement/ 1/14
be analyzed to understand the various factors contributing to the


change over the period for better interpretation and analysis.
It helps various stakeholders of the business and the Analyst community

to analyze the impact of business decisions over the company’s top line
and bottom line and helps identify various trends over the period,
which otherwise would have been difficult and time-consuming.
Comparative Income Statement shows absolute figures, changes in

absolute figures, unlimited data in terms of percentages, and an
increase (or decrease) in percentages over the different periods. With
the help of a Comparative Income Statement format in one snapshot, a
company’s performance over different periods can be compared, and
changes in expense items and Sales can be easily ascertained.
Table of contents
What is a Comparative Income Statement?

Example and Format of Comparative Income Statement
Types of Comparative Income Statement Analysis

#1 – Horizontal Analysis
Colgate’s Horizontal Analysis
#2 – Vertical Analysis
Vertical Analysis of Colgate’s Income Statement
Advantages
Disadvantages
Recommended Articles
Example and Format of Comparative Income

Statement
Let’s understand the Comparative Income Statement with the help of an
example.
ABC Limited has provided the following information about its two

accounting periods, i.e., 2016 and 2017.
Prepare a Comparative Income Statement and interpret the basic findings.
2016 (Amount in 2017 (Amount in

Particulars
USD) USD)
Net Sales 200000 250000
Cost of Goods Sold 150000 180000
Selling, General and Administrative

25000 30000
Expenses
Other Income 12000 18000
Taxes 8000 16000
Interest 17000 18000
Comparative Income Statement format of ABC Limited for the period ended
2016 and 2017
2016 2017
Absolute Percentage
Particulars (Amount in (Amount in
Change Change
USD) USD)
Net Sales 200000 250000 50000 25%
Less: Cost of Goods Sold 150000 180000 30000 20%
Gross Profit 50000 70000 20000 40%
Less: Selling, General and

25000 30000 5000 20%
Administrative Expenses
Net Operating Profit 25000 40000 15000 60%
Add: Other Income 12000 18000 6000 50%
Earnings before Interest

37000 58000 21000 56.76%
and Taxes
2016 2017
Absolute 
Percentage
Particulars (Amount in (Amount in
Change Change
USD) USD)
Less: Interest 17000 18000 1000 5.88%
Earnings before Taxes 20000 40000 20000 100%
Less: Taxes 8000 16000 8000 100%
Net Profit 12000 24000 12000 100%
Based on the above Comparative Income Statement of ABC Limited, it can

be analyzed how an increase in sales (25% over the previous year) has
impacted the Net profit (increased by 100% in absolute terms over the
previous year) and how various line items have contributed. Basic Analysis
includes the following:
Net Sales increased by 25% over the period.
Gross Profit Ratio increased from 25% to 28% over the period.
Net Profit Ratio increased from 6% to 9% over the period.
Income Tax Expenses doubled from 00 to 000 and Interest expense

increased by 5.88%.
Thus we can see how Comparative Income Statement helps ascertain the
changes of various components of expenses and identify the reason for
changes that help the management in decision making in the future.
Types of Comparative Income Statement

Analysis
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#1 – Horizontal Analysis
One of the popular techniques of Comparative Income Statement shows the

change in amount both in absolute and percentage terms over some time. It
helps in easy analysis of trends and, as such, is also known as Trend Analysis.
One can easily observe growth patterns and seasonality using the
Horizontal Analysis Technique.
An Illustration showing Horizontal Analysis is depicted below:
Colgate’s Horizontal Analysis
Let us now look at an example of Colgate’s Horizontal analysis.
We can find the growth rate of Net Sales of 2015; the formula is (Net Sales
2015 – Net Sales 2014) / Net Sales 2014. Likewise, we can find the growth
rates of other line items using a similar formula.
We note the following –
In 2014 and 2015, Colgate saw negative revenue growth.
The cost of Sales has also decreased during the corresponding period.
Net Income decreased the most in 2015, with a 36.5% decline in 2015.
#2 – Vertical Analysis
Another technique that exhibits Comparative Income Statement in terms of


the relative size of line items is the Vertical Analysis. This technique enables
easy comparison of Income statements of companies of different sizes. It
shows each item on the Income Statement as a percentage of Base figures
(usually the Sales figure) with the statement. Under this, all components of
Income statements are shown as a percentage of sales, such as Gross Profit,
Net Profit, Cost of Sales, etc., which makes it very handy to use even when
comparing differently as it removes the Size biases and makes the analysis
more straightforward and understandable. It is mostly used for
individual statements for a reporting period but can also be used for
timeline analysis.
An Illustration showing Vertical Analysis is depicted below.
Vertical Analysis of Colgate’s Income

Statement
Below is the snapshot of Colgate’s Comparative Income Statement
In Colgate, Gross profit has been in the range of 56%-59%.
SG&A expenses decreased from 36.1% in 2007 to 34.1% in the year

ending 2015.
Operating income dropped significantly in 2015.
Net income decreased substantially to less than 10%.
Between 2008 to 2014, the tax rate was in the range of 32-33%.
Advantages 
It makes analysis simple and fast as past figures can easily be compared
with the current figures without referring to separate past Income
Statements.
It makes comparisons across different companies also easy and helps

analyze the efficiency both at Gross Profit Level and Net Profit Level.
It shows percentage changes in all income statement line items, which

makes analysis and Interpretation of Top Line (Sales) and Bottom Line
(Net Profit) easy and more informative.
Disadvantages
Financial Data reported in the Comparative Income Statement is useful
only if the same accounting principles are followed to prepare such
statements. If the deviation is observed, such a Comparative Income
Statement will not serve the intended purpose.
A comparative Income Statement is not of much use in cases where the

company has diversified into new business lines, which have drastically
impacted Sales and profitability.
Recommended Articles
This article has been a guide to Comparative Income Statement. Here we
discuss its examples and types of comparative income statement analysis
(horizontal and vertical analysis). You may learn more about financial analysis
from the following articles –
Vertical Analysis of Income Statement
Basics Examples of Income Statement
Multi-Step Income Statement
Partial Income Statement

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4/23/23, 10:37 AM Comparative Income Statement (Examples, Analysis, Format)

Home » Investment Banking Resources » Financial Statement Analysis » Comparative Income

Comparative Income Statement

A comparative Income Statement is the income statement in which

What is a Comparative Income

Comparative Income Statement format combines several Income

It can also be used to compare two different companies’ operating

Thus Comparative Income Statement is an essential tool through which

be analyzed to understand the various factors contributing to the

It helps various stakeholders of the business and the Analyst community

Comparative Income Statement shows absolute figures, changes in

What is a Comparative Income Statement?

Types of Comparative Income Statement Analysis

Colgate’s Horizontal Analysis

Vertical Analysis of Colgate’s Income Statement

Example and Format of Comparative Income

Prepare a Comparative Income Statement and interpret the basic findings.

2016 (Amount in 2017 (Amount in

Net Sales 200000 250000

Cost of Goods Sold 150000 180000

Selling, General and Administrative

Other Income 12000 18000

Taxes 8000 16000

Interest 17000 18000

Net Sales 200000 250000 50000 25%

Less: Cost of Goods Sold 150000 180000 30000 20%

Gross Profit 50000 70000 20000 40%

Less: Selling, General and

Net Operating Profit 25000 40000 15000 60%

Add: Other Income 12000 18000 6000 50%

Earnings before Interest

Less: Interest 17000 18000 1000 5.88%

Earnings before Taxes 20000 40000 20000 100%

Less: Taxes 8000 16000 8000 100%

Net Profit 12000 24000 12000 100%

Based on the above Comparative Income Statement of ABC Limited, it can

Net Sales increased by 25% over the period.

Net Profit Ratio increased from 6% to 9% over the period.

Income Tax Expenses doubled from 00 to 000 and Interest expense

Types of Comparative Income Statement

One of the popular techniques of Comparative Income Statement shows the

An Illustration showing Horizontal Analysis is depicted below:

Colgate’s Horizontal Analysis

Let us now look at an example of Colgate’s Horizontal analysis.

We note the following –

In 2014 and 2015, Colgate saw negative revenue growth.

Another technique that exhibits Comparative Income Statement in terms of

An Illustration showing Vertical Analysis is depicted below.

Vertical Analysis of Colgate’s Income

In Colgate, Gross profit has been in the range of 56%-59%.

SG&A expenses decreased from 36.1% in 2007 to 34.1% in the year

Operating income dropped significantly in 2015.

Net income decreased substantially to less than 10%.

It makes comparisons across different companies also easy and helps

It shows percentage changes in all income statement line items, which

A comparative Income Statement is not of much use in cases where the

Vertical Analysis of Income Statement

Basics Examples of Income Statement

Multi-Step Income Statement

Partial Income Statement

1. PRIYANKA VADOARIYA says 

YOUR INFORMATION IS SO EASIEST TO UNDERSTAND, AND ALSO THAT IS

INVESTMENT BANKING RESOURCES