Financial Statements of Service Businesses
As seen in Chapter 3, there are fundamental differences in the balance sheet and P&L compositions between goods and services businesses. But not all service businesses resemble Infosys Ltd. Service businesses can be asset heavy and may hold significant amount of inventory too. Then what is the need to study analysis of service firms separately from firms engaged in goods? Are they really different? Producing a “unit of a service” versus a unit of a physical item for sale has quite different impact on costs of production/service for the respective firms. Impact of operating leverage and benefits of scale economies are different for both types of firms as we will see in the examples in this chapter. ...
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