# Thread: if a company is improving

1. ## if a company is improving

How can I found out if looking at a company's financial statements if they are improving after a recession?

3. ## Re: if a company is improving

That's a very strange response. It seems to focus on the (very nebulous) relation of a firm's publicly traded stock price to its profitability. But the question said nothing about stock price.

jmersh, the crucial thing on a company's financial statement is "net profit". If that is increasing from one period to another, then the company is improving.

(And, this question really has nothing to do with mathematics.)

4. ## Re: if a company is improving

Hi HOI. I want to thank you for your help with my previous math questions. I have learned a lot.

On to the subject at hand. You are correct profits are a "bottom line" way of measuring but if you read his question it states after a recession. There are two issues with profits being the true measuring stick of improvement after a recession. 1) Profits can be manipulated by depreciation and amortization which is fancy talk for accounting tricks. 2) Profits are a product of other drivers mainly revenues/sales and how much it costs to make these goods ie margins as mentioned. During a recession there is a compression of profits and reduction of inventories and on and on and on............ but if you are controlling the costs of these goods you can "predict" (another can of worms) the net profit of the company when revenues/sales reach the middle stage of the business cycle. If your cost of goods are lower than the competition you can be sure that your profits will be following assuming proper demand (and that is a giant assumption). And yes it has do with mathematics because what we are talking about are ratios ie sales - cost of goods / sales. You were correct the stock market was tangential in nature but I mentioned that in my response.The publicly traded price, on aggregate, is a very good way of measuring the profitability of a company. There are no good cheap companies. Often times there is a divergence between current price and "intrinsic value of a company" but on aggregate it is. Bottom line is that improving/great margins = getting ready to make lots of money.

regards

5. ## Re: if a company is improving

This info can be found on the Income Statement