buffetLogicIncomeStatement.py

import pandas
import numpy


#Income Statement


#business revenue
var = totalRev
#business expenses
var = businessExp
#net earnings
netEarn = totalRev - businessExp
#net earnings function over years


costOfGoodsRev =
#cost of purchasing goods company is reselling
# or cost of materials/labor used in manufacturing products being sold

grossProft = totalRev - costOfGoodsRev

#grossProfitMargin
GPM = grossProfit/totalRev

#consistently higher gross profit margin than competitors!
#60% or better, over 40% good

#apple has 33%

#20-40 is a competitive industy

#below 20% is bad

#gpm not a failsafe but a good inital indicator


#track gpm across (ideally) ten years


#combininh operating expenses?

#Selling,General and Administrative Expenses

# vary greatly from company to company
# measure variation across years, the less fluctation is better; consistency is key
# lower the sga the better
#sga as % of gross profit
SGA = 
perSGA = (SGA/grossProfit)/100
# 30-80% is good
# over 100% is bad


#R&D

# lower as % of gross profit better

#Depretiation

#lower depretiation costs as % of gross profit is better

#below 10% good over 20% bad, no higher than 30%





#Interest Expense


#little or no interest expense

#below 15% of operating income is good, ideal
# 30% ok depending on industry
# find industry specific values of variables, take averages for example
# 50% bad
# over 70% very bad, for example bear sterns paid this and then 230 before/at financial crash

#RULE: in any given industry, company with lowest interest expense is usually best
#create function on this.



#Gain/Loss on sale of assets and other

#safely ignore


#Income before tax

#Income taxes paid
#check income before tax, subtract 35% from; corporation tax?
#if it matches, good.


#net earnings:

#trend - historical upward trend?
# single entry is useless

# companies with advantage report higher % of net earnings to total revenues than competitors


#% earned on total revenues - 20% and over is really good
# 10-20% is grey area, ripe for undiscovered gems
#below 10% bad

#Exception is in financial/banks, as higher numbers could be poor risk management




#Per share earnings


#consistent upward trend


#erratic and losses are bad