What are the investment secrets in the income statement
1. The lower the sales cost of a good company, the better.
Only by minimizing sales costs can we Maximize sales profits. Although the cost of sales figure alone cannot tell us whether the company has a lasting competitive advantage, it can tell us the size of the company's gross profit.
It can be seen by analyzing the company's income statement Whether this enterprise can create profits and whether it has lasting competitiveness. Whether a company can be profitable is only one aspect. We should also analyze the way the company obtains profits, whether it requires a lot of research and development to remain competitive, and whether it needs to leverage wealth to obtain profits. By mining this information from the income statement, we can determine the driving force behind the economic growth of this enterprise, because the source of profits is more meaningful than the profits themselves.
2. The key indicator of long-term profitability is gross profit margin .
The gross profit of an enterprise is theThe basis of operating income is that only companies with high gross profit margins are likely to have high net profits. When we observe whether a company has a sustainable competitive advantage, we can refer to the company's gross profit margin.
Gross profit margin can reflect the company’s performance to a certain extent How about sustained competitive advantage. If a company has a sustained competitive advantage and its gross profit margin is at a high level, the company can freely price its products or services so that the selling price is much higher than the cost of the product or service itself. If a company lacks a sustainable competitive advantage, its gross profit margin will be at a low level, and the company can only price products or services based on the cost and earn a meager profit.
3. Special attention sales expense.
Enterprises will incur sales expenses during the operation process , the amount of sales expenses directly affects the long-term operating performance of the company. When paying attention, it can be linked to income to assess the rationality of the structure ratio. In addition, fixed expenses can be controlled from variable to variable.
4. Measurement of selling expenses and general administrative expenses High and low.
During the company’s operations, sales expenses and General overhead costs are not to be taken lightly. We must stay away from companies that always require high selling expenses and general administrative expenses, and try to find companies with low selling expenses and general administrative expenses. Generally speaking, the lower the proportion of such expenses, the higher the company's return on investment will be.
5. Stay away from companies with high research and development costs company.
Those companies that must spend huge amounts of research and development expenditures have The shortcomings in their competitive advantages put their long-term business prospects at risk, and investing in them is not safe.
Those who rely on patent rights or technological leadership to maintain competition Advantageous companies do not actually have real and sustainable competitive advantages, because once the protection period of patent rights expires or new technologies emerge, these so-called competitive advantages will disappear. If companies want to maintain their competitive advantages, they must spend a lot of money. The funds and energy spent on developing new technologies and new products will also lead to a reduction in net profits.
6. Don’t ignore depreciation expenses.
The impact of depreciation expenses on the company’s operating performance is Very big. When examining whether a company has a sustainable competitive advantage, we must pay attention to the depreciation of factories, machinery and equipment, etc.
7. The less interest expenses, the better.
Compared with other companies in the same industry, those Companies with the lowest interest expense as a percentage of operating income,Often the ones with the most sustainable competitive advantage. Interest expenses are financial costs, not operating costs. They can be used as a measure of the competitive advantage of companies in the same industry. Generally, companies with less interest expenses have better operating conditions.
8. Non-recurring items should not be ignored when calculating operating indicators Sexual gains and losses.
When examining the operating status of an enterprise, it is important to Exclude the gains or losses from unexpected events such as non-recurring items, and then calculate various operating indicators. After all, such non-recurring gains and losses cannot happen every year. Also consider the impact of income taxes to analyze net profit margin.
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