What is the easiest and most accurate way to determine how much money a business (individual or company) makes in revenue and profit?
In: Economics
Publicly traded corporations (at least in the US) have to file reports that should give most people a decent sense of revenue and profit. Revenue tends to be fairly straightforward (did money come in?), although there can be timing issues that are impactful (e.g., recognition of revenue received in December for services to be delivered in January). But large companies will generally be consistent from year to year on things like this, so over time it evens out. Profit is much trickier, and looking at EBTIDA is generally a better indicator of year to year profitability (that’s Earnings Before Taxes, Interest, Depreciation and Amortization, all of which can be volatile and only loosely related to what is happening in the company currently). It’s important to understand how cash flow and the balance sheet interacts with the profit and loss statement (where revenue and profit appears) – e.g., a company with big profits but running low on cash is very different from a company with big profits and lots of cash.
For smaller companies that are not publicly traded, it is usually much harder to get a good picture of their financials. They showcase what they want known and stay mum on the rest. There are companies that compile credit and other information about non-publicly traded companies, and they sell profiles and research about those companies.
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