Comparative Income Statement
A Comparative Income Statement is a financial report that presents a company’s revenues, expenses, and net income or loss for two or more consecutive periods, usually side by side. This statement is useful for analyzing and comparing the company’s financial performance over time, as it highlights trends and changes in revenues, expenses, and profitability.
By comparing income statements from different periods, stakeholders can identify areas of growth, efficiency improvements, and potential issues related to the company’s operations. This information helps in assessing the company’s profitability, cost management, and overall financial performance.
A Comparative Income Statement can provide valuable insights, such as:
- Changes in revenue, which can indicate market demand, pricing strategies, and the effectiveness of sales and marketing efforts.
- Changes in cost of goods sold (COGS), which can help assess the company’s cost management and gross margin performance.
- Changes in operating expenses, which can provide insights into the company’s operational efficiency and cost control measures.
- Changes in net income, which indicate the company’s overall profitability and its ability to generate returns for its shareholders.
Overall, a Comparative Income Statement is an essential tool for financial analysis that helps investors, creditors, and management to make informed decisions about the company’s financial performance and growth prospects.
Example of a Comparative Income Statement
here’s a simple example of a Comparative Income Statement for a hypothetical company, “PQR Corporation,” showing the financial data for two consecutive years.
PQR Corporation
Comparative Income Statement
(All figures in USD)
Year Ended December 31,
2022 2021
Revenues 600,000 500,000
Cost of goods sold (360,000) (320,000)
Gross Profit 240,000 180,000
Operating Expenses Selling and administrative (100,000) (90,000)
Depreciation (25,000) (20,000)
Total Operating Expenses (125,000) (110,000)
Operating Income 115,000 70,000
Interest Expense (15,000) (10,000)
Net Income 100,000 60,000
From this Comparative Income Statement, we can observe the following changes:
- Revenues increased by $100,000 (from $500,000 to $600,000).
- Cost of goods sold increased by $40,000 (from $320,000 to $360,000).
- Gross profit increased by $60,000 (from $180,000 to $240,000).
- Selling and administrative expenses increased by $10,000 (from $90,000 to $100,000).
- Depreciation increased by $5,000 (from $20,000 to $25,000).
- Total operating expenses increased by $15,000 (from $110,000 to $125,000).
- Operating income increased by $45,000 (from $70,000 to $115,000).
- Interest expense increased by $5,000 (from $10,000 to $15,000).
- Net income increased by $40,000 (from $60,000 to $100,000).
This example demonstrates how a Comparative Income Statement can help stakeholders identify changes in the company’s financial performance over time, providing insights into revenue growth, cost management, and profitability, which are essential for decision-making and analysis.
