Income Statement Analysis-6

The income statement can also be broken down into its component parts and analyzed on a percentage basis.


Percentage Breakdown
Some of the principle items in an income statement, that could be expressed as a percentage of sales, for example, include:

Sales (100% in this example)
Cost of Sales
Gross Margin
Fixed Costs or Overhead
Net Income Before Interest and Taxes
Interest Expense and Financing Costs
Net Income Before Income Tax
Income Tax
Net After-Tax Income

By doing a comparative analysis based on percentages over different periods, you can see how the different components of the income statement are evolving. Here again, graphs would be a useful visual tool.