How to read an income statement: Alphabet Inc case study

How to read and analyze an income statement of a company? This income statement tutorial is a sequel to “How to read an annual report”, and covers the 2017 income statement of Alphabet Inc, the parent company of Google and other bets. There are many interesting things to learn about Alphabet Inc and its business model. The income statement is a great starting point for that learning journey.

⏱️TIMESTAMPS⏱️
00:00 Introduction
01:19 Income statement example
03:21 Revenue analysis
05:36 Income statement margin analysis
07:44 Margin comparison Alphabet Inc vs Facebook
08:45 Cost of revenues
10:53 Analyzing other income
11:16 Provision for income taxes
12:14 Income statement analysis summary

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This video is for educational purposes only, none of the comments in this video should be interpreted as investment advice. I am not a shareholder of Alphabet Inc. As the video is for educational purposes, please do try this at home! I am very interested to hear your comments and suggestions, please post them below the video.

I first take only the numbers of the latest year, to set priorities for the analysis. Going down the income statement from top to bottom, the first thing that jumps out is the revenue of more than $110 billion. Second item: margins, how do operating income and net income compare to revenue. Third item is an unusual one: European Commission fine of $2.7 billion. What is behind that, and what are the implications going forward? Fourth item, other income which in the case of Alphabet Inc is a positive contributor. Fifth item: the provision for corporate income taxes. This looks unusually high at more than half of the earnings before taxes. “To Do” list for the Alphabet Inc income statement analysis: revenue, margins, European Commission fine, other income, and taxes.

Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

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