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!

[xueli]

The best financial analysis I've seen so far. This video goes for deeper reasons and provides more details than others. Nice explanation! Thank you!!!!

[stamatouvable]

I understood everything before I watched this video, but you showed me how to be efficient with my analysis. Thank you. Great video

[wgmentis]

Thanks so much for I was looking long time for such an explanatory video!!!

[cristoferlopez-vargas]

Yo I am watching this at 2am and this is on point! I’m watching all your videos and subscribing.

[cdexswzaq]

Thank you so much for sharing! I am a beginner and have recently bought some financial related courses on udemy, however, i still found it hard to understand thoroughly. This financial education channel on youtube is definitely way better and I have finally known how to read and analyze an annual report! thank you and looking forward for more coming videos!

[ontario]

Very Good Analysis, and explaination. Thank you for helping me in my finance class!!

[tube]

Thank You Sir, This is one of the coolest analysis. ❤
Love from Pakistan

[WhosFrZx]

at 6:30 when you were calculating the gross profit margin, I came across the same calculation as you; however, I noticed their percentages are on point of you just considered net sales, without membership and other income. Which way should we consider when we look at this?

[craigbohall]

Intelligent presenter!!! If the long term debt was issued many years ago at considerably higher interest rates, can that amount be refinanced down to a more reasonable interest rate or would there be a prohibitive pre payment clause on that issued amount? Say the 5.1% for instance.

[dakotamercer]

HI there, I am trying to get into stock market trading and wanted to build a good ability to analyze companies fundamentally. I have a question; at 7:36 your calculations for Return on sales is made by dividing net income by net sales (Net Income/Net Sales). Am I mistaken but I thought Return on Sales was calculated by dividing OPERATING profit by net sales (Operating Profit/Net Sales). Correct me if I am mistaken. Thanks!

[Agustinoism]

I got a quick question can you do a video on short term vs long term debt and on maturity if you have time

[LalieB]

This is pretty good! I'm a new junior executive and this is simple to understand 👍🏽. Thank you! Where can I good good case studies to work on?

[seanehz]

what website are you using for the income statement?

[craigtaylor]

where can you find a companies increased sales, and can you only find them on quaterly statements ? or can you get ones in between?

[vaibhavbhagne]

Why there isn't any depreciation in income statement of walmart?

[manojbgm]

In one of the p&l I was reviewing, I found that the company is reporting "increase/(decrease) in inventory" also as income. And in expenditure it has reported the raw materials consumption. I am confused why inventory information is added in p&l?

[sindujashukla]

So of we forecast the revenue we can do do by using only the comparable store sales?

[kennethbeard]

How do you define ROS% as the accepted definition for this term seems to be operating profit margin (EBITDA margin) or OM%?

[sumaiyashaikh]

Good explanation Sir. But there is 1 problem, in profit and loss statement I couldn't find detail information e.g. where to find details information on Net Sales, Walmart International income, etc. Please guide me guide me to find such detail information so that I could properly analyze the P&L statement.