Video Link: https://youtu.be/twr_-f9IpIg
In this episode, Peter Lynch talks about what is an income statement and the basic formula.
In this episode, you’ll learn:
Why investment professionals no longer had a big edge as compared to the past?
A simple explanation of income statement.
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PETER LYNCH 00:00
5 or 10 years ago, investment professionals had a big edge. They got more research and information than small investors and they got it sooner. But those days are long gone.
Basic financial information is readily available from a dozen or more of different sources. Investment pros aren’t digesting all the good information and throwing just the scraps to the public anymore. Everyone has a seat at the table right now.
Here are some places to get started.
If a balance sheet provides a snapshot of a company’s financial position, an income statement tells you how the company got there.
Income statements tell you how much money the company made or lost from its operations over some period of time. The basic formula is simple. You are asking how things went over the period, usually a quarter or a year.
Over that time, you add up all the money the company brought in from selling products or services, then subtract all of the money the company spent to create those products or deliver those services.
What is left is the net income. Net income is also referred to as earnings or profits. I hope by now you have been convinced that your story should always include an explanation of how the company plans to improve its earnings or to sustain its growth rate over time.