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How do you read the profit and loss statement of a company to?

1 Well the first thing you have to see the sales growth or revenue growth of the company from its core business. As presently our gdp growth is 7 percent and inflation is about 5 percent,now adding up these two comes 12 percent.Hence to qualify for a good company its revenue growth should be a minimum of 12 percent. 2 Net profit growth- the net profit growth of the company should increase by minimum of 15 percent year after year for qualifying it to be good company. 3 Net margin-It is also a very good indicator of the pricing power of the company at the market place.Normally a good company net margin increases also year after year and it should be more in comparison to its peer. 4 ROCE-that is return on capital employed. It tells us that how efficient is the company in utilizing its capital.A company with more than of 15 percent of roce is known as a good company. 5 Debt-A company with no debt or low debt is known to be a good company. 6 Equity capital-A company with a low equity is known to be a good company. So these are the important parameters which can be checked from profit and loss statement from an investor viewpoint of a company. Hope this helps you.

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