Marketing Analysis : Cross Sectional Analysis And Industry Comparative Analysis

1015 Words Sep 7th, 2015 null Page
Introduction Businesses use financial statements to monitor company health and viability. The income statement, balance sheet, owner’s equity and the statement of cash flows are four different snapshots of a given business and provide necessary relative information based on what a stakeholder is looking. Trend analysis, cross-sectional analysis and industry comparative analysis are three ratios used to analyze financials statements and are beneficial to each business specific to market demographics and trend analysis.
Income Statement An income statement is often referred to as a profit and loss statement or P&L and is a review of sales, operational expenses, and profit. According the Melicher & Norton (2014), "the income statement...shows the firms sales and revenues and expenses over a time period, such as a month, quarter, or year" (p. 319). Income statements are used to monitor budget restraints, control profitability and explain how assets have been used. The major accounts on an income statement include revenue, gross profit, operating income, income before taxes and net income (Melicher & Norton, 2014). Revenue is the the cost of goods sold (COGS) and gross profit is the sales (cash) made from selling products and services prior to expenses and administrative charges. Operating income is interest pre-tax and is typically referred to as earnings before interest and taxes (EBIT). Income before taxes equates to pre-taxable income and net income is the profit…

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