Financial Analysis - A fairytale lore towards analysing different aspects of numbers of the company - Revenue - Part 1/n

Income statement is one of the most important statement of the four types of financial statements of the company and revenue or topline is one of the starting figures of income statement. 

Before diving into the revenue, we should thoroughly understand how the company earns its revenue the revenue recognition policy and how does the company computes or calculate its revenue.

Total revenue can roughly be classified into 2 heads

1.      1. Operational Revenue

2.      2. Non-Operational Revenue

Revenue can be earned in 3 ways -

1. Cash Sales - Paisa Do , Samaan Lo - 

  

Although the cash is not directly seen in these types of company as they maybe working capital intensive or capex intensive so the cash that is earned is invested into either of the above or any other financial assets including short or long term investment , we have to check Cash Flow from Investing, but that's an conversation for another day.

2. Credit Sales - Take the goods today or provide a service today, get payment later when contracts gets completed or sometimes even later or sometimes gets disputed and if still not given, Write off❎ / Provisioned/ Bad Debt.☠

How to check if the company is credit oriented based - Calculate Trade Receivable / Sales over the years  not for single years or just last years, a single off event happening at company side might trigger trade receivable for certain years like expansion to new geography, testing out new product with longer credit terms.

3. Advance Sales - Takes Money Upfront before contract expires and provides goods and services later.

How to check if the company is credit oriented based - Calculate Deferred Revenue or Contract Liability / Sales over the years  not for single years or just last years, a single off event happening at company side might trigger trade receivable for certain years .