The Income Statement

Value investors determine how successful a company is by studying its income statement. In addition, the income statement is used to determine the profitability, credit worthiness, and value of a company. Bear in mind that the measurement of income includes many assumptions and allows for the use of various accounting principles, which could allow for manipulation of income and expenses. Many companies over the years have manipulated fraudulently their income statements to overstate their revenues and profits. Even experienced management personnel have failed to uncover fraudulent financial statements when they have bid to take over those companies. On November 20, 2012, Hewlett-Packard wrote down $8 billion of ...

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