Elements of the Income Statement

I have elected to discuss Proctor and Gamble (PG) for this week’s discussion post. I watch this company closely as I own shares. I purchased shares in February of 2015 for $85/share and then the stock price plummeted to around $70/share. It has slowly been making its way back up and closed today at $80.99/share. Proctor & Gamble is a company that produces various household items. It is likely that all of us have something made by Proctor & Gamble in our homes.

Total Revenue =               $76,279,000

Cost of Revenue =           $38,876,000

Gross Profit =                    $37,403,000

Gross Profit Margin =     $37,403,000/$76,279,000 = .49 or 49% Gross Profit Margin

FY15 GPM = 49%

FY14 GPM = 49%

FY13 GPM = 50%

 

Gross Profit =                    $37,403,000

Operating Expenses =    $25,613,000

Operating Income =        $11,790,000

Operating Profit Margin = $11,790,000/76,279,000 = .16 or 16% Operating Profit Margin

FY15 OPM = 16%

FY14 OPM = 18%

FY13 OPM = 17%

 

Net Income =                    $7,036,000

Total Revenue =               $76,279,000

Net Income Margin =     $7,036,000/$76,279,000 = .09 or 9% Net Income Margin

FY15 NIM = 9%

FY14 NIM = 15%

FY13 NIM = 14

 

Ratios are a great way to analyze a company’s past and present performance. Each ratio tells us something different. Gross Profit Margin indicates how likely it is a company can pay all of its fixed non-product related expenses. In the case of PG, they have about half of their revenue remaining after the cost of goods sold is deducted. This shows that the company is strong and able to absorb further expenses. Operating Profit Margin basically tells a company whether the price of their products being sold is adequate to cover their expenses. Net Income Margin is the percentage of Net Income as it relates to total revenue. It explains what percentage of total revenue the net income equals.

Reference

Yahoo Finance. (2015). The Proctor & Gamble Company (P&G). Income Statement. Retrieved from http://finance.yahoo.com/q/is?s=PG+Income+Statement&annual

Gibson, C. H. (2013). Financial Reporting and Analysis: Using Financial Accounting Information (13th ed.). Mason, OH: South-Western Cengage Learning. ISBN 13: 9781133188797