How to Analyze “Net Profit” of a company?
Updated: Jul 23, 2021
If you are somebody who want to invest in a publicly listed companies and is interested in analyzing the any company, Net profit is one of the most important number to look for.
As without sufficient profit, the company might have to depend on the external funding such as debt or frequent issue of new shares to grow. Being dependent on external sources have its own perils.
With debt, the company has to pay huge amount of interest and you dont know when the debt tap gets closed.
That’s why net profit of the company needs to be looked at closely:
1. Other income- In a “Profit and Loss Statement”, after Revenue comes “Other Income”. The other income is not related to the core function of the business and should be subtracted while calculating the Net Profit. Other income usually includes interest on the company’s deposit, sale of scrap etc