Analyzing the Income Statement
Learning Outcomes
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What’s Included
Course Overview
Course Overview
In this first lesson, you will explore financial analysis at a high level, brush up on your knowledge of income statements and prime yourself for any potential pitfalls when reading financial statements.
The Income Statement
The Income Statement
Reacquaint yourself with the basic building blocks that make up an income statement. In this lesson, we break down these core components, and explore how vertical and horizontal techniques are used to analyze financial data.
Revenue, Gross Profit and Gross Margin
Revenue, Gross Profit and Gross Margin
The first section of the income statement deals with revenue and profits. In this lesson, we map these to our case study business and explore some of the direct costs of producing and selling goods and services. We will also examine our first ratio: gross margin.
Operating Expenses and Operating Income
Operating Expenses and Operating Income
Before reaching the bottom line, businesses must factor in gains and losses made from regular operations. In this lesson, we'll continue to work our way down the income statement, defining terms like OPEX, depreciation and amortization and how these are calculated.
Other Income, Taxes and The Bottom Line
Other Income, Taxes and The Bottom Line
For most businesses, the most important entry on the income statement is the bottom line. In this lesson, we explore the final section of the statement, and the calculations that must be performed to calculate net income.
Vertical and Horizontal Analysis
Vertical and Horizontal Analysis
With the deep dive completed, it's time to start making sense of the data. In this lesson, we will apply both vertical and horizontal analysis techniques to our income statement, both to give meaning to the figures and also to identify trends and patterns in the data.
Financial Ratios and the Income Statement
Financial Ratios and the Income Statement
Financial ratios are powerful tools that empower analysts to ask incisive questions of their data. In this lesson, you will learn basic ratios that can be applied to the income statement, such as gross margin, profit margin and operating margin.
Income Statement Interconnectivity
Income Statement Interconnectivity
Whether you are a business stakeholder or a financial analyst, it's unlikely you will be performing analysis in isolation. In this lesson, we will explore the level of interdependency and interconnectedness of the three main financial statements, and how one feeds into the other.
