7. Other Income:
Given below is the most typical and simple structure of a P/L statement:
7. Other Income:
This is recurring income from other sources such as rent, interest, dividend, commission etc. It should at best be small portion of the Net revenues of the company. If this income is quite high in comparison to sales, it warrants analysis of the business model of the company. It is best to compare other income of the business over last several years and also find if there were specific triggers for high other income in some types of businesses.
For example: In banking, there are times when interest rates are high and due to which, while on one hand banks keep receiving deposits, on the other hand, loan off take is relatively slow. In such cases, banks invest in long term G-Secs and benefit from the rise in their prices when subsequently interest rates fall. In such years, other income accounts for a huge component of the total income.
In our example, other income is Rs. 5.
