From the DRE, the finance professional can extract a series of other rich information to help compose the company's economic-financial analysis.
We can mention, for example, the concept of margin, which is some profit in relation to the revenue of a given period. This information is all available in the DRE.
Let's assume that a company has revenue of R$100 and saudi arabia whatsapp data an operating profit (EBIT) of R$30. It will have an operating margin of 30% (= 30/100). Margin indicators can be understood as a measure of efficiency: how efficient the company is in generating profits (in the case of the example, operating profit), given the level of revenue it had. Analyzing the operating margin is important to analyze how efficient the operation is in generating profits, after paying for all operating expenses – such as raw materials, equipment maintenance, marketing, advertising, payroll and accounts payable in general.
There is also another relevant margin for understanding the operational performance of the business. This is the gross margin. In addition to interpreting the evolution of the operating margin, the finance professional can interpret the gross margin, which is calculated as Gross Profit divided by Revenue, both pieces of information also available in the Income Statement.
One of the pieces of evidence that can be interpreted when analyzing gross margin is the quality of the company's commercial relationships: purchasing and sales relationships . After all, two things that can contribute significantly to gross margin gains are better sales or better purchases. In industries, for example, this analysis helps to understand the efficiency of raw material purchasing policies, among other fundamental factors, for example.
Finally, the net margin can also be analyzed. It is calculated by dividing the net profit by the company's revenue. All the information needed to calculate this last margin is also available in the income statement.
The net margin ends up being the most famous among the margins, as it indicates, in the last line: how much is left for the shareholder, given the company's revenue level. This is because the last line of the DRE – Net Income or Net Loss – represents how much profit was generated in that period that belongs to the investor.
Finally, there is one point worth noting. It is common to find financial managers who confuse the concept of net margin with profitability. Therefore, correctly understanding the origins and meanings of these two measures – both very important, but different in essence – makes all the difference in making an efficient and consistent financial analysis.