Accounting and Key Figures
What is the Annual Result? How to Assess a Company's Financial Performance
The annual result shows what a company is left with after incomes, expenses, financial items, and tax have been accounted for. This figure appears at the bottom of the income statement and is often referred to as the “bottom line”. A positive annual result indicates a surplus,
2 min read · Translated from Norwegian. Read the original
The annual result shows what a company is left with after incomes, expenses, financial items, and tax have been accounted for. This figure appears at the bottom of the income statement and is often referred to as the “bottom line”. A positive annual result indicates a surplus, while a negative annual result indicates a deficit.
How is the annual result calculated?
Simply put, the calculation starts with operating income. From this, cost of goods sold, salaries, and other operating expenses are deducted. This gives the operating profit. Financial income is then added, and financial expenses are deducted. Finally, the tax expense is included.
Simplified formula:
Annual Result = Operating Profit + Net Financial Items − Tax
Accounts can contain more items than this, but the formula shows the main logic. The figures should always be read in conjunction with the notes and the rest of the annual accounts.
What does the annual result tell us?
The annual result provides a quick answer to whether the business as a whole generated a surplus during the period. It can be used when you are evaluating a potential customer, supplier, employer, or partner. A stable surplus over several years can indicate profitable operations, but one single good year is not necessarily enough.
For example, a company might achieve a high annual result after selling a property. This does not automatically mean that ordinary operations have improved. Therefore, you should compare the annual result with the operating profit and look for large one-off items.
Look at the development over time
Compare at least three years when data is available. Ask whether the profit is growing in line with turnover, whether margins are stable, and whether deficits are temporary or recurring. A growth company may have a deficit because it is investing heavily, while a mature company is normally expected to show more stable profitability.
The annual result also does not tell you how much money the company has in the bank. Incomes and expenses can be booked before payment occurs. To assess solvency, you must also examine cash flow, liquidity, and debt.
How to use the annual result in Proffi
On a company profile, Proffi can display the annual result alongside turnover, operating profit, and historical financial figures. This makes it easier to see whether the development is stable or if one year stands out significantly. Use the figure as a starting point, not as a full credit assessment.
Frequently asked questions
- Is the annual result the same as a surplus?
- Yes, when the annual result is positive, it is usually referred to as a surplus. A negative annual result is a deficit.
- Can the annual result be positive when the operating profit is negative?
- Yes. Positive financial items or other income can boost the total result even if ordinary operations are running at a deficit.
- Where do the figures come from?
- Companies required to submit annual accounts send them to the Regnskapsregisteret (Norwegian Register of Company Accounts). Deadlines and obligations can change, so always check current information with Brønnøysundregistrene (The Brønnøysund Register Centre, a Norwegian government body responsible for official registers).