From the course: Corporate Financial Statement Analysis
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Compare profitability across industries
From the course: Corporate Financial Statement Analysis
Compare profitability across industries
As we have just discussed, profitability measures are in the eye of the beholder. Recall our income statement for Walmart. There are a number of profitability measures on this one income statement. You can see that they disclose a gross margin, they disclose operating income, they disclose income before taxes, and they disclose net income. The point, when someone uses the term profit or profitability, you need to ask them to be more specific. Are they referring to gross profit or operating profit? Operating profit or net income? And remember our income statement for Target. They have the same different profitability terms that we saw in the income statement of Walmart. Now, another point, you cannot compare Target's operating income to Walmart's net income. That's just comparing apples and oranges. Now, another thing to notice when we look at the income statements for Walmart and Target is that the percentages look a lot alike. And there's no surprises there. Companies in the same…
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