How to Read the Financial Statements
The financial statements on an issue's page are the company's own filings arranged onto a standard chart of accounts. This guide explains what is left untouched, what is computed anew, and how to read the diagram.
What is a standard chart of accounts?
Account names and their order differ from company to company, so filings left as they are do not sit side by side well. The filed accounts are therefore arranged onto a standard chart while the filed figures are preserved. The fiscal calendar and the reporting currency are left exactly as the company filed them, so this will not agree to the last digit with a commercial screen.
A period filed in a currency other than the won shows the amounts in the filed currency with the currency code beside them. For those periods the per-share figures and multiples are not computed.
How do I read the profit flow diagram?
The diagram traces where revenue goes at each step on its way to net income, using the filed amounts as they are. Revenue on the left splits off into cost of sales and selling and administrative expenses, and operating income runs on through the non-operating result and income tax to reach net income on the right. Whatever a step's items leave unexplained is shown separately as other.
A fiscal year carrying a loss at gross profit, at operating income or at net income is left to the table rather than drawn as a flow.
Which lines are computed rather than filed?
Most of the table is the filed values as they stand, though a few lines are computed from them. Free cash flow is operating cash flow less the cash spent on purchases of property, plant and equipment. Receivable days and the cash conversion cycle come from the turnover days of receivables, inventories and payables. Earnings per share uses the basic earnings per share the company filed, and only where that is absent is owners' net income divided by the share count.
What is not in the table?
A year whose own filing is absent is filled from the restated comparative figures in the following year's filing, and it is marked as such. Operating indicators outside the statements, such as order backlogs, and audit opinions are not covered, and per-share figures follow the filed values without retroactive adjustment for changes in par value. A company that files no revenue total, as banks and insurers do, is shown under the name of the line it actually filed.
Frequently Asked Questions
- Why do the financial figures differ from a commercial screen?
- Because the filed accounts are arranged onto a standard chart while the fiscal calendar and the reporting currency are left exactly as the company filed them. The filed figures are preserved, but the result will not agree to the last digit with a commercial screen.
- How is free cash flow computed?
- It is operating cash flow less the cash spent on purchases of property, plant and equipment. It shows what is left of the cash the business earned once capital spending has been paid for.