How to analyze an income statement - Walmart example (case study)

What is an income statement? How to analyze an income statement? This income statement tutorial shows you how to get started with reviewing the income statement of a company, the same way I would do it with participants in one of my finance for non-financial manager courses.

⏱️TIMESTAMPS⏱️
00:00 How to analyze an income statement
00:13 Income statement example
01:23 Analyzing revenue
05:27 Analyzing profit margins
08:04 How to analyze net income
10:46 Analyzing the effective tax rate
11:44 Income statement analysis summary

Here is Walmart’s income statement, or profit and loss statement (P&L) for the fiscal years ended January 31st, 2017, 2016 and 2015. 2017 is on the left, 2015 on the right. The income statement can be found in the annual report. There is a lot of information here, we need to set priorities on which items we are going to dive into, to get the most valuable use of our analysis time.

My proposal would be to first dive into the revenue performance, which seems to have dropped from 2015 to 2016, and then has come back up in 2017. What are the main drivers for revenue?

Next I would look into the margin performance. How have gross margin, operating margin, and net income developed in relation to the fluctuations in revenue?

As #retail is traditionally a fairly low margin industry, every penny counts. Net Income is almost 9 billion dollars lower than Operating Income, let’s review what is going on in the interest and tax lines.

Philip de Vroe (The Finance Storyteller) aims to make strategy, #finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how #financialstatements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!