The Three Lens Theory and the Income Statement

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The first lens allows us to analyse the economic aspect, which covers all phenomena related to profits, losses, cost of sales, return on capital and sales revenue. In financial statements, these categories philippine cellphone number code correspond to the profit and loss account. Among other things, this account shows the value of operating activities.

In the economic aspect of the three-lens theory, operating profit occupies a very important position due to its informative value considered on three levels:

In the event of operating losses in the financial year, the company is certain that its core business is not profitable and can take steps to rectify the situation;
The concept of operating profit makes it possible to identify which aspect of the company's activity the revealed problem is related to;
Operating profit is the basis for constructing profitability measures that offer the opportunity to compare companies within the same sector, while ignoring differences in their financial structures.
EBIT



The second piece of information, in order of calculation, is EBIT. The term EBIT is an acronym for Earnings Before Interest and Taxes, which refers to a certain level of income that means profit (or loss) before interest and taxes
. It should also be added that the EBIT measure is influenced by the results of extraordinary events and financial income. This measure is widely used in financial analysis according to international standards in highly developed countries. Many other ratios and measures are constructed using it, even if only from the perspective of debt analysis.