This feature and its companion, the Interactive Balance Sheet, are designed to help beginning investors understand the basics of company financial statements and determine where potential trouble spots might occur.
Here's how it works: Click on a linked line item in the sample income statement below. Your browser must have JavaScript enabled in order to use this feature. The line items highlighted were chosen because they're some of the first places the auditors go to ensure that a company is in compliance with Generally Accepted Accounting Principles. We also highlight some ways a company uses accounting that may be aggressive -- but still in accordance with GAAP. For each, we give the pitfalls a company can face, and the weapons you can use to identify problems.| Revenue | 550,000 | ||||||||
| Cost of goods | |||||||||
| Beginning inventory | 40,000 | ||||||||
| Net purchases | 325,000 | ||||||||
| Cost of goods available for sale | 365,000 | ||||||||
| Less: ending inventory | (35,000) | ||||||||
| Cost of goods sold | (330,000) | ||||||||
| Gross margin on sales | 220,000 | ||||||||
| Expenses | |||||||||
| Selling expenses | |||||||||
| Sales salaries | 48,000 | ||||||||
| Nonrecurring item | 12,000 | ||||||||
| Other | 13,000 | 73,000 | |||||||
| General and administrative expenses | |||||||||
| Office salaries | 27,100 | ||||||||
| Depreciation | 5,500 | ||||||||
| Amortization | 3,200 | ||||||||
| Bad debt | 4,500 | ||||||||
| Other | 24,200 | 64,500 | |||||||
| Total operating expenses | (137,500) | ||||||||
| Income from operations | 82,500 | ||||||||
| Other revenues | |||||||||
| Interest | 5,200 | ||||||||
| Dividends | 7,200 | ||||||||
| Gain on sale of equipment | 8,600 | 21,000 | |||||||
| 103,500 | |||||||||
| Other expenses | |||||||||
| Interest | 9,400 | ||||||||
| Writeoff - goodwill | 5,000 | ||||||||
| Unusual item - loss on sale of long-term investment | 5,100 | (19,500) | |||||||
| Income before taxes and extraordinary items | 84,000 | ||||||||
| Income tax expense | (33,600) | ||||||||
| Income before extraordinary items | 50,400 | ||||||||
| Extraordinary item - gain on disposal of business segment | 24,000 | ||||||||
| Net income | 74,400 | ||||||||
| Other Comprehensive Income | 12,000 | ||||||||
| Comprehensive Income | 86,400 | ||||||||
TheStreet Premium Services For Personal Service: 877-471-2967
Jim Cramer's Action Alerts PLUS:
Trade right alongside a Wall Street pro — enjoy access to his Charitable Trust portfolio and be sent trade alerts BEFORE he makes a move. Learn MoreETF Profits:
Get money-making ideas from the hottest investment vehicle on the planet. Our experts show you how to play various ETF sectors to help pump-up your portfolio. Learn MoreOptionsProfits:
Get 50+ trade ideas a week from the industry's top options experts. Plus — exclusive commentary on market trends and essential trading tools. Learn MoreReal Money:
Our team of professional Wall Street Pros — including Jim Cramer, Doug Kass, and Nicholas Vardy — delivers intelligent analysis, timely trade ideas, and colorful commentary. Learn MoreStocks Under $10:
Break into the market with small- and mid-cap stocks... all $10 or less! David Peltier tells you exactly which low-priced stocks he's buying and selling. Learn MoreTo begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
blog comments powered by Disqus
| Dow Jones | S&P 500 | NASDAQ | 10-Year Note | |
|---|---|---|---|---|
| 12,801.23 | 1,342.64 | 2,903.88 | 19.69 |
Oil *
117.67
|
|
DOWN
89.23 |
DOWN
9.31 |
DOWN
23.35 |
DOWN
0.78 |
10 Yr
1.97%
SPDR Gold
167.14
|
|
-0.69%
|
-0.69%
|
-0.80%
|
-3.81%
|
Data delayed 20 minutes |

Connect with TheStreet