The weight of "Other Revenues", or when item A5 is considered operational

To reclassify a balance sheet means to restore the original accounting structure to a more functional scheme for the analysis we are developing. A frequent example is the placement of item A5 of the statutory income statement. This item refers to revenues and income other than operating income which therefore NO should contribute to the formation of the operating margin (EBITDA ed EBIT). In some cases, however, such income may refer to assets "related" to those characteristic and "proportional" to them.

In the example we are dealing with one of these cases in which an Italian metallurgical company presents important values ​​of heading A5. These revenues refer to the sale of "metal shavings" which are "scraps" generated by the main processing. The hypothesis applied is that, being this item "Constant" and "proportional" to operating revenues (item A1) it is possible to change its location in the reclassified format used by the analyst, adding it to Revenues (A1). The impact can be substantial on: margins, scores, ratings and many other calculations ...


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