Financial ratio analysis can provide detailed Insight on the current performance of a business as well as potential problems that can be avoided once identified. Business owners can use several types of ratios to obtain financial information, however to specific financial ratios that can be used to identify profitability and liquidity include comparative and ratio analysis. Comparative analysis is an item-by-item comparison of two or more comparable alternatives while ratio analysis is a tool used by Individuals to conduct a quantitative analysis of Information In a company’s financial statements.
Net Income Is widely used as an Indicator of a company’s profitability. Further refining net Income, sustainable income removes irregular items from net income to obtain “the most likely level of income to be obtained in the future” (Kismet et al. , 2011, p. 686). According to Amazon. Coma’s income statement, the company did not report any discontinued operations or extraordinary items, and therefore its net income is considered its sustainable Income. Using 2010 as the base year, horizontal analysis Is used in Table 1 to evaluate Amazon-Coma’s change In net sales, operating expenses, and net Income
