How to Read Financial, Profit & Loss Statement of a Company - Stocks for Beginners | EP 01 | Groww
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Stocks for Beginners - How
Stocks for Beginners - How to Read Profit and Loss Statement of a Company?
When you look for a company to invest in, you should look at the company's fundamentals and invest for the longer horizon. We have been asked many times, to come out with an educational series and for us to tell you how you can read the financial statement of a company.
In the first video of Stocks for Beginners series we tell you, how you can read financial statements of a company and see how it can perform in the coming time.
We tell you how you can read the fundamental report of a company and what the relevant ratios are for you to keep in mind, to decide whether you should invest in that company.
Stocks for Beginners Video Outline:
It is said many time whole invest that you should choose a company, look at its fundamentals and then invest for the longer horizon.
If we look at the income statement (profit and loss statement) of a company, it tells us how the company performed in the past quarter or in the past financial year.
The first thing in the profit and loss statement is the revenue.
The revenue tells us the amount of sales a company made in the past quarter/financial year. It tells us the amount the company sold goods at.
After revenue comes expense. Taking the example of a company that makes pens. The company sold Rs 100 worth good in the past quarter, so its revenue is Rs 100. Expense is the cost incurred by the company to make those goods. Consider that the cost incurred by the company to make pens is Rs 50. There is another important expense called Employee cost.
Now after removing the sale and expense you get an amount which is called Operating profit. In this case, it is Rs 50. To get this amount, you only have to see the amount used in the company's operations. The operating profit margin tells us what the company's operating margin has been. in this case, it is 50%.
You have to compare the operating profit margin, of this quarter or financial year, to the previous quarter to see how efficiently the company is utilising its resources.
The next thing is interest or interest expense. The pen making company which we spoke about had a sale of Rs 100 and had borrowed a debt of Rs 1000. The company has to pay a 10% interest. In this case, the interest expense is Rs 100. Lower the debt taken, lower is the interest rate. After removing the Rs 10, the company's operating profit is Rs 40.
The next thing comes depreciation. A company bought a company at Rs 100, which had a life of 10 years, every year its value decreases by Rs 10. So now the profit is Rs 30. There is other income which comes from everything other than the company's core business. Consider is that is Rs 10, then the company's profit is Rs 40.
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Disclaimer: These are not any recommendations for any funds or stocks and are meant only for educational purposes.
When you look for a company to invest in, you should look at the company's fundamentals and invest for the longer horizon. We have been asked many times, to come out with an educational series and for us to tell you how you can read the financial statement of a company.
In the first video of Stocks for Beginners series we tell you, how you can read financial statements of a company and see how it can perform in the coming time.
We tell you how you can read the fundamental report of a company and what the relevant ratios are for you to keep in mind, to decide whether you should invest in that company.
Stocks for Beginners Video Outline:
It is said many time whole invest that you should choose a company, look at its fundamentals and then invest for the longer horizon.
If we look at the income statement (profit and loss statement) of a company, it tells us how the company performed in the past quarter or in the past financial year.
The first thing in the profit and loss statement is the revenue.
The revenue tells us the amount of sales a company made in the past quarter/financial year. It tells us the amount the company sold goods at.
After revenue comes expense. Taking the example of a company that makes pens. The company sold Rs 100 worth good in the past quarter, so its revenue is Rs 100. Expense is the cost incurred by the company to make those goods. Consider that the cost incurred by the company to make pens is Rs 50. There is another important expense called Employee cost.
Now after removing the sale and expense you get an amount which is called Operating profit. In this case, it is Rs 50. To get this amount, you only have to see the amount used in the company's operations. The operating profit margin tells us what the company's operating margin has been. in this case, it is 50%.
You have to compare the operating profit margin, of this quarter or financial year, to the previous quarter to see how efficiently the company is utilising its resources.
The next thing is interest or interest expense. The pen making company which we spoke about had a sale of Rs 100 and had borrowed a debt of Rs 1000. The company has to pay a 10% interest. In this case, the interest expense is Rs 100. Lower the debt taken, lower is the interest rate. After removing the Rs 10, the company's operating profit is Rs 40.
The next thing comes depreciation. A company bought a company at Rs 100, which had a life of 10 years, every year its value decreases by Rs 10. So now the profit is Rs 30. There is other income which comes from everything other than the company's core business. Consider is that is Rs 10, then the company's profit is Rs 40.
To watch more Videos on Stocks and Mutual Funds,
Subscribe to Groww Channel 👉 http://bit.ly/2rjkBHu and hit the 🔔 to watch our videos first.
⚡ Top 5 Viral Videos on Groww ⚡
✅IDFC Vs HDFC: IDFC first bank share vs HDFC bank sh...
✅ ITC Stock Analysis: ITC Stock analysis in detail | ITC - ...
✅ Best Mutual Funds: Mutual fund for beginners | How to se...
✅ Rakesh Jhunjhunwala Investments: Rakesh Jhunjhunwala's portfolio - Whe...
✅ Ashok leyland Stock Analysis: Ashok leyland stock analysis in detai...
Useful Links:
To learn more about Mutual Funds and Stocks,
Visit: https://groww.in/
Download Groww App📱
https://groww.app.link/HY3iy0TsUS
Follow us on:
Facebook: Facebook: growwapp
Twitter: Twitter: _groww
Instagram: Instagram: groww_official
LinkedIn: LinkedIn: groww.in
Telegram: https://t.me/GrowwHQ
#StocksForBeginners #EP01 #Financials #Groww
Disclaimer: These are not any recommendations for any funds or stocks and are meant only for educational purposes.
4 سال پیش
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