Analyzing an Income Statement Checkpoint

Analyzing an Income Statement CheckPoint

There are many important points in an income statement that an analyst would use in assessing the profitability of a company. Analysts review financial reports of a company to determine or forecast future earnings and help advice or recommend investments. In analyzing Eastman Kodak’s income statement there are clearly many important points an analyst would consider in assessing the profitability of Kodak. The first thing an analyst may look at is Kodak’s sales and operating costs. Kodak income statement shows a increase in sales since 2002 and its operating costs show about a 15 percent increase between 2002 and 2003. Looking at this point of Kodak’s income statement an analyst may consider Kodak to be somewhat profitable but because of Kodak’s increase in operating cost an analyst would dig deeper as to what was the cause of Kodak’s operating cost increase.

The increase in operating cost between 2002 and 2003 seems rather large considering Kodak only increased its sales by almost 3 percent. Taking a further look, an analyst might have some concerns when looking over Kodak’s account payables and liabilities. There was a high increase in Kodak’s liabilities which pose concern for how well and willing is Kodak able in paying back its debt. Although Kodak’s total assets could cover its liabilities, the high increase in liabilities alone would cause some concern with analyst. Another important point analyst may use in assessing the profitability of Eastman Kodak is the substantial decrease in the company’s net income between 2002 and 2003. This alone will cause some concern and would pose analyst to research further the reasons for such decrease. Another important point an analyst would use is Kodak’s income statement figures in comparison to one of Kodak’s close competitor. This may help analyst in assessing Eastman Kodak’s profitability by showing

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