# Finance 101: Reading an Income Statement **URL:** \ **Category:** Factual Questions\ **Created:** [March 15, 2007, 8:19pm UTC](https://boards.straightdope.com/t/finance-101-reading-an-income-statement/396081 "2007-03-15T20:19:59Z")\ **Posts on this page:** 1\ **Page:** 2
**Author:** ![Jackknifed\_Juggernaut](https://avatars.discourse-cdn.com/v4/letter/j/9de053/32.png) [@Jackknifed\_Juggernaut](https://boards.straightdope.com/u/Jackknifed_Juggernaut)\ **Post date:** [March 16, 2007, 8:17pm UTC](https://boards.straightdope.com/t/finance-101-reading-an-income-statement/396081/21 "2007-03-16T20:17:10Z")
No analysis of a company’s financial statements is complete without 1) looking at the cash flow statement, and 2) reading all of the notes to the financial statements. 2 things that struck me about the company were 1) that it’s paying out a substantial amount in legal settlements and 2) it has tons of debt (at junk bond rates). In 2006, it took a large loss by refinancing debt with more debt and preferred stock. Is the company making money? I say no. If a company can’t generate enough cash flow to service its debt interest, it will soon fold. HealthSouth will need to make a serious turnaround. If you buy the stock or junk bond, you’re betting that it will. One more thing: the company has taken enough losses to have significant tax-loss carryforwards. These are accumulated tax reductions that it can use. But it can only use them once it makes a profit. Company’s can actually sell these to other companies for cash. When you see this, it is usually a sign of desperation. [Previous page](https://boards.straightdope.com/t/finance-101-reading-an-income-statement/396081.md?page=1)