Analysing Income Statements

Decoding Income Statements for the CFA Level 1 Exam

Welcome to the exciting world of income statements! In this friendly guide, we’ll explore the essentials of understanding income statements while keeping it light and engaging. Ready to become an income statement expert? Let’s dive in!

PRE: Components and Format of an Income Statement

Dive into the fantastic realm of income statements, where we’ll uncover the mystic components of revenues, expenses, gains, and losses. Explore the enchanted single-step and multi-step formats and learn to analyze them like a true accounting sorcerer!

► Summon your powers and delve deeper into the world of income statements here.

Revenue Recognition

Take a trip down Revenue Recognition Lane, where you’ll learn the ins and outs of the five-step process and unlock the secrets of long-term contracts, variable consideration, and contract modifications. Trust us; you’ll be the life of the financial statement analysis party!

► Stroll down Revenue Recognition Lane here.

Inventory Expense Recognition

Unravel the mysteries of inventory expense recognition and become the expense matchmaker extraordinaire! Learn how to use different inventory expense recognition methods such as FIFO, LIFO, and weighted average cost. But beware! We’ll also shed some light on the dark arts of expense recognition manipulation.

►Master the matching principle and more right here.

PRE: Depreciation and Amortisation Expense Recognition

Embark on a quest to conquer depreciation and amortization! Discover how to slay expense calculations using the straight-line method and accelerated methods, including the mighty double-declining balance. But beware of hidden dragons, like impairment and subjectivity, lurking in expense calculations.

►Become a depreciation and amortization hero here.

Non-Recurring Items and Non-Operating Items

Embark on a thrilling expedition through the income statement jungle, hunting for elusive non-recurring and non-operating items! Learn how to track down discontinued operations, extraordinary items, unusual or infrequent items, and accounting changes hiding in the financial foliage.

►Join the non-recurring and non-operating item safari here.

Basic Earnings Per Share

Master the art of earnings per share (EPS) and learn how to calculate basic EPS like a pro! Discover why EPS matters and the impact of stock splits and stock dividends on this crucial financial metric.

►Dive into the world of EPS calculations here.

Diluted Earnings Per Share

Explore the depths of diluted EPS and learn how convertible preferred stock, convertible bonds, and stock options can make a splash in a company’s earnings per share calculations!

►Dive into diluted EPS mastery here.

Common-Size and Ratio Analysis

Transform into a financial Sherlock Holmes by mastering common-size analysis and income statement ratios, helping you compare companies of different sizes with ease and uncover hidden insights in their strategies!

►Begin your financial investigation here.

PRE: Comprehensive Income

Get ready for a financial expedition as you venture into the realm of comprehensive income, discovering its connection to retained earnings and navigating the landscape of foreign currency translations, pension liabilities, and unrealized gains or losses!

►Gear up for your comprehensive income journey here.