Case Interview

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Income Statement

Three financial instruments: Cash flow, IS, & BS
Definition: An income statement (or profit and loss statement or statement of revenue and expenses) is a record of a company’s profit or loss over a specific period of time. The profit or loss is calculated by taking the revenues generated and subtracting the expenses incurred over the same period of time. The income statement has 3 major categories: Revenue, Expenses, and Profit or Loss.

Revenue - It is also referred to as gross sales or “top line” as it sits at the top of the income statement.
Costs:

COGS - the direct costs of making products or providing a service.
OPEX - Indirect, These include selling, general, and administrative (SGA) expenses, management salaries, depreciation, and amortization. Depreciation and amortization are non-cash expenses that reflect the value of big assets like machinery or buildings going down over time. Other operating expenses for our burger restaurant would include things like advertising, the rent on the company’s headquarters, and the salary of the CEO
Non-OPEX - Interest on loans

So if the amount of cash generated by selling a product or service is important to your analysis, you should look at EBITDA. If looking at a more fully loaded cost is the focus of your analysis, use EBIT.

Common formulas

Profit = Revenue - costs OR Profit (or Loss) = (price per unit x number of units sold) – (cost per unit x number of units sold)

Revenue is the money generated from selling a product or service. It can be broken down into price per unit and number of units sold.

Revenue can be broken down by product or service line, customer type, or geographic region (e.g., North American, Europe, Asia)

Costs are the expenses incurred to make the product or service and can be broken down into cost per unit and number of units sold.

Costs can be broken into fixed costs and variable costs, or components such as overhead, salary, etc.

whereas variable costs are only incurred with the production of each additional unit. Because of this, it can be helpful to sell incremental units even at a loss for a short period of time if it helps cover fixed costs.

Profit Margin: Profit margin indicates how many cents of profit the company generated for each dollar of sale.

Market Share: Market share (%) =total company revenue / total industry revenue
Growth rate: Growth rate (%) = (New – Old) / Old

My Consulting Offer - Case Interview Prep

Income Statement

Three financial instruments: Cash flow, IS, & BS
Definition: An income statement (or profit and loss statement or statement of revenue and expenses) is a record of a company’s profit or loss over a specific period of time. The profit or loss is calculated by taking the revenues generated and subtracting the expenses incurred over the same period of time. The income statement has 3 major categories: Revenue, Expenses, and Profit or Loss.

Revenue - It is also referred to as gross sales or “top line” as it sits at the top of the income statement.
Costs:

COGS - the direct costs of making products or providing a service.
OPEX - Indirect, These include selling, general, and administrative (SGA) expenses, management salaries, depreciation, and amortization. Depreciation and amortization are non-cash expenses that reflect the value of big assets like machinery or buildings going down over time. Other operating expenses for our burger restaurant would include things like advertising, the rent on the company’s headquarters, and the salary of the CEO
Non-OPEX - Interest on loans

So if the amount of cash generated by selling a product or service is important to your analysis, you should look at EBITDA. If looking at a more fully loaded cost is the focus of your analysis, use EBIT.

Common formulas

Profit = Revenue - costs OR Profit (or Loss) = (price per unit x number of units sold) – (cost per unit x number of units sold)

Revenue is the money generated from selling a product or service. It can be broken down into price per unit and number of units sold.

Revenue can be broken down by product or service line, customer type, or geographic region (e.g., North American, Europe, Asia)

Costs are the expenses incurred to make the product or service and can be broken down into cost per unit and number of units sold.

Costs can be broken into fixed costs and variable costs, or components such as overhead, salary, etc.

whereas variable costs are only incurred with the production of each additional unit. Because of this, it can be helpful to sell incremental units even at a loss for a short period of time if it helps cover fixed costs.

Profit Margin: Profit margin indicates how many cents of profit the company generated for each dollar of sale.

Market Share: Market share (%) =total company revenue / total industry revenue
Growth rate: Growth rate (%) = (New – Old) / Old