Definition of common-size income statement

common-size income statement

income statement that presents items as a percentage of revenues.

log size model

Abrams’ model to calculate discount rates as a function of the logarithm of the value of the firm.

Cash flow per common share

Cash flow from operations minus preferred stock dividends, divided by the
number of common shares outstanding.

Common market

An agreement between two or more countries that permits the free movement of capital
and labor as well as goods and services.

Common stock

These are securities that represent equity ownership in a company. common shares let an
investor vote on such matters as the election of directors. They also give the holder a share in a company's
profits via dividend payments or the capital appreciation of the security.

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

Common stock equivalent

A convertible security that is traded like an equity issue because the optioned
common stock is trading high.

Common stock market

The market for trading equities, not including preferred stock.

Common stock ratios

Ratios that are designed to measure the relative claims of stockholders to earnings
(cash flow per share), and equity (book value per share) of a firm.

Common-base-year analysis

The representing of accounting information over multiple years as percentages
of amounts in an initial year.
common-size analysis The representing of balance sheet items as percentages of assets and of income
statement items as percentages of sales.

Convention statement

An annual statement filed by a life insurance company in each state where it does
business in compliance with that state's regulations. The statement and supporting documents show, among
other things, the assets, liabilities, and surplus of the reporting company.

Economic income

Cash flow plus change in present value.

Fixed-income equivalent

Also called a busted convertible, a convertible security that is trading like a straight
security because the optioned common stock is trading low.

Fixed-income instruments

Assets that pay a fixed-dollar amount, such as bonds and preferred stock.

Fixed-income market

The market for trading bonds and preferred stock.

Income beneficiary

One who receives income from a trust.

Income bond

A bond on which the payment of interest is contingent on sufficient earnings. These bonds are
commonly used during the reorganization of a failed or failing business.

Income fund

A mutual fund providing for liberal current income from investments.

Income statement (statement of operations)

A statement showing the revenues, expenses, and income (the
difference between revenues and expenses) of a corporation over some period of time.

Income stock

common stock with a high dividend yield and few profitable investment opportunities.

Investment income

The revenue from a portfolio of invested assets.
Investment management Also called portfolio management and money management, the process of
managing money.

Monthly income preferred security (MIP)

Preferred stock issued by a subsidiary located in a tax haven.
The subsidiary relends the money to the parent.

Net income

The company's total earnings, reflecting revenues adjusted for costs of doing business,
depreciation, interest, taxes and other expenses.

Notes to the financial statements

A detailed set of notes immediately following the financial statements in
an annual report that explain and expand on the information in the financial statements.

Official statement

A statement published by an issuer of a new municipal security describing itself and the issue

Pro forma financial statements

Financial statements as adjusted to reflect a projected or planned transaction.

Pro forma statement

A financial statement showing the forecast or projected operating results and balance
sheet, as in pro forma income statements, balance sheets, and statements of cash flows.

Registration statement

A legal document that is filed with the SEC to register securities for public offering.

Size

Large in size, as in the size of an offering, the size of an order, or the size of a trade. size is relative from
market to market and security to security. Context: "I can buy size at 102-22," means that a trader can buy a
significant amount at 102-22.

Spread income

Also called margin income, the difference between income and cost. For a depository
institution, the difference between the assets it invests in (loans and securities) and the cost of its funds
(deposits and other sources).

Statement billing

Billing method in which the sales for a period such as a month (for which a customer also
receives invoices) are collected into a single statement and the customer must pay all of the invoices
represented on the statement.

Statement of cash flows

A financial statement showing a firm's cash receipts and cash payments during a
specified period.

Statement-of-cash-flows method

A method of cash budgeting that is organized along the lines of the statement of cash flows.

Statement of Financial Accounting Standards No. 8

This is a currency translation standard previously in
use by U.S. accounting firms. See: statement of Accounting Standards No. 52.

Statement of Financial Accounting Standards No. 52

This is the currency translation standard currently
used by U.S. firms. It mandates the use of the current rate method. See: statement of Financial Accounting
Standards No. 8.

Taxable income

Gross income less a set of deductions.

Underwriting income

For an insurance company, the difference between the premiums earned and the costs
of settling claims.

BOOK VALUE OF COMMON STOCK

The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals:
(Stockholders’ equity) / (common stock shares outstanding)

CASH-FLOW STATEMENT

A statement that shows where a company’s cash came from and where it went for a period of time, such as a year.

Earnings per share of common stock

How much profit a company made on each share of common stock this year.

INCOME STATEMENT

An accounting statement that summarizes information about a company in the following format:
Net Sales
– Cost of goods sold
--------------------
Gross profit
– Operating expenses
--------------------
Earnings before income tax
– income tax
--------------------
= Net income or (Net loss)
Formally called a “consolidated earnings statement,” it covers a period of time such as a quarter or a year.

INCOME TAX

What the business paid to the IRS.

NET INCOME

The profit a company makes after cost of goods sold, expenses, and taxes are subtracted from net sales.

RATIO OF NET INCOME TO NET SALES

A ratio that shows how much net income (profit) a company made on each dollar of net sales. Here’s the formula:
(Net income) / (Net sales)

RATIO OF NET SALES TO NET INCOME

A ratio that shows how much a company had to collect in net sales to make a dollar of profit. Figure it this way:
(Net sales) / (Net income)

Cash Flow statement

A financial report that shows the movement in cash for a business during an accounting period.

Financial reports or statements

The Profit and Loss account, Balance Sheet and Cash Flow statement of a business.

Residual income (RI)

The profit remaining after deducting from profit a notional cost of capital on the investment in a business or division of a business.

Common stock

Shares of ownership sold to the public.

Dividend income

income that a company receives in the form of dividends on stock in other companies that it holds.

Income Statement

One of the basic financial statements; it lists the revenue and expense accounts of the company.
The income statement is prepared for a given period of time.

Interest income

income that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies.

Net income

The last line of the income statement; it represents the amount that the company earned during a specified period.

Statement of Cash Flows

One of the basic financial statements; it lists the cash inflows and cash outflows of the company, grouped into the categories of operating activities, financing activities, and investing activities. The statement of Cash Flows is prepared for a specified period of time.

Statement Retained Earnings

One of the basic financial statements; it takes the beginning balance of retained earnings and adds net income, then subtracts dividends. The statement of Retained Earnings is prepared for a specified period of time.

statement of cash flows

One of the three primary financial statements
that a business includes in the periodic financial reports to its outside
shareowners and lenders. This financial statement summarizes the business’s
cash inflows and outflows for the period according to a threefold
classification: (1) cash flow from operating activities (cash flow from
profit), (2) cash flow from investing activities, and (3) cash flow from
financing activities. Frankly, the typical statement of cash flows is difficult
to read and decipher; it includes too many lines of information and
is fairly technical compared with the typical balance sheet and income
statement.

earnings before interest and income tax (EBIT)

A measure of profit that
equals sales revenue for the period minus cost-of-goods-sold expense
and all operating expenses—but before deducting interest and income
tax expenses. It is a measure of the operating profit of a business before
considering the cost of its debt capital and income tax.

statement of financial condition

See balance sheet.

financial reports and statements

Financial means having to do with
money and economic wealth. statement means a formal presentation.
Financial reports are printed and a copy is sent to each owner and each
major lender of the business. Most public corporations make their financial
reports available on a web site, so all or part of the financial report
can be downloaded by anyone. Businesses prepare three primary financial
statements: the statement of financial condition, or balance sheet;
the statement of cash flows; and the income statement. These three key
financial statements constitute the core of the periodic financial reports
that are distributed outside a business to its shareowners and lenders.
Financial reports also include footnotes to the financial statements and
much other information. Financial statements are prepared according to
generally accepted accounting principles (GAAP), which are the authoritative
rules that govern the measurement of net income and the reporting
of profit-making activities, financial condition, and cash flows.
Internal financial statements, although based on the same profit
accounting methods, report more information to managers for decision
making and control. Sometimes, financial statements are called simply
financials.

income statement

Financial statement that summarizes sales revenue
and expenses for a period and reports one or more profit lines for the
period. It’s one of the three primary financial statements of a business.
The bottom-line profit figure is labeled net income or net earnings by
most businesses. Externally reported income statements disclose less
information than do internal management profit reports—but both are
based on the same profit accounting principles and methods. Keep in
mind that profit is not known until accountants complete the recording
of sales revenue and expenses for the period (as well as determining any
extraordinary gains and losses that should be recorded in the period).
Profit measurement depends on the reliability of a business’s accounting
system and the choices of accounting methods by the business. Caution:
A business may engage in certain manipulations of its accounting methods,
and managers may intervene in the normal course of operations for
the purpose of improving the amount of profit recorded in the period,
which is called earnings management, income smoothing, cooking the
books, and other pejorative terms.

net income (also called the bottom line, earnings, net earnings, and net

operating earnings)
This key figure equals sales revenue for a period
less all expenses for the period; also, any extraordinary gains and losses
for the period are included in this final profit figure. Everything is taken
into account to arrive at net income, which is popularly called the bottom
line. Net income is clearly the single most important number in business
financial reports.

profit and loss statement (P&L statement)

This is an alternative moniker
for an income statement or for an internal management profit report.
Actually, it’s a misnomer because a business has either a profit or a loss
for a period. Accordingly, it should be profit or loss statement, but the
term has caught on and undoubtedly will continue to be profit and loss
statement.

stockholders' equity, statement of changes in

Although often considered
a financial statement, this is more in the nature of a supporting schedule
that summarizes in one place various changes in the owners’ equity
accounts of a business during the period—including the issuance and
retirement of capital stock shares, cash dividends, and other transactions
affecting owners’ equity. This statement (schedule) is very helpful
when a business has more than one class of stock shares outstanding
and when a variety of events occurred during the year that changed its
owners’ equity accounts.

Common Stock

A financial security that represents an ownership claim on the
assets and earnings of a company. This claim is valid after the
claims of the debt providers and preferred stockholders have been
satisfied.

Cost of Common Stock

The rate of return required by the investors in the common stock of
the company. A component of the cost of capital.

Return on Common Equity Ratio

A measure of the percentage return earned on the value of the
common equity invested in the company. It is calculated by
dividing the net income available for distribution to shareholders
by the book value of the common equity.

common body of knowledge (CBK)

the minimum set of knowledge needed by a person to function effectively in a particular field

mission statement

a written expression of organizational purpose that describes how the organization uniquely meets its targeted customers’ needs with its products or services

residual income

the profit earned by a responsibility center that exceeds an amount "charged" for funds committed to that center

Statement on Management Accounting (SMA)

a pronouncement developed and issued by the Management
Accounting Practices Committee of the Institute of Management
Accountants; application of these statements is
through voluntary, not legal, compliance

tax-deferred income

current compensation that is taxed at a future date

tax-exempt income

current compensation that is never taxed

values statement

n organization’s statement that reflects its
culture by identifying fundamental beliefs about what is
important to the organization

vision statement

a written expression about the organization’s
future upon which all company personnel can base
their decisions and behavior so that everyone is working
toward the same long-run results

Fixed-income security

A security that pays a specified cash flow over a
specific period. Bonds are typical fixed-income securities.

Income

Net earnings after all expenses for an accounting period are subtracted from all
revenues recognized during that period.

Income statement

A financial report that summarizes a company’s revenue, cost of
goods sold, gross margin, other costs, income, and tax obligations.

Income tax

A government tax on the income earned by an individual or corporation.

Net income

The excess of revenues over expenses, including the impact of income taxes.

Operating income

The net income of a business, less the impact of any financial activity,
such as interest expense or investment income, as well as taxes and extraordinary
items.

Statement of cash flows

Part of the financial statements; it summarizes an entity’s cash
inflows and outflows in relation to financing, operating, and investing activities.

Statement of retained earnings

An adjunct to the balance sheet, providing more detailed information about the beginning balance, changes, and ending balance in
the retained earnings account during the reporting period.

common-size balance sheet

Balance sheet that presents items as a percentage of total assets.

common stock

Ownership shares in a publicly held corporation.

income statement

Financial statement that shows the revenues, expenses, and net income of a firm over a period of time.

residual income

Also called economic value added. Profit minus cost of capital employed.

statement of cash flows

Financial statement that shows the firm’s cash receipts and cash payments over a period of time.

Disposable Income

income less income tax.

Incomes Policy

A policy designed to lower inflation without reducing aggregate demand. Wage/price controls are an example.

National Income

GDP with some adjustments to remove items that do not make it into anyone's hands as income, such as indirect taxes and depreciation. Loosely speaking, it is interpreted as being equal to GDP.

National Income and Product Accounts

The national accounting system that records economic activity such as GDP and related measures.

Permanent Income Hypothesis

Theory that individuals base current consumption spending on their perceived long-run average income rather than their current income.

Real Income

income expressed in base-year dollars, calculated by dividing nominal income by a price index.

Tax-Related Incomes Policy (TIP)

Tax incentives for labor and business to induce them to conform to wage/price guidelines.

Employee Retirement Income Security Act of 1974 (ERISA)

A federal Act that sets minimum operational and funding standards for employee benefit
plans.

Accumulated Other Comprehensive Income

Cumulative gains or losses reported in shareholders'
equity that arise from changes in the fair value of available-for-sale securities, from the
effects of changes in foreign-currency exchange rates on consolidated foreign-currency financial
statements, certain gains and losses on financial derivatives, and from adjustments for underfunded
pension plans.

Adjusted Income from Continuing

Operations Reported income from continuing operations
adjusted to remove nonrecurring items.

Book Income

Pretax income reported on the income statement.

Cash Flow–to–Income Ratio (CFI)

Adjusted cash flow provided by continuing operations
divided by adjusted income from continuing operations.

Common Stock

That part of the capital stock of a corporation that carries voting rights and represents
the last claim on assets and dividends.

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