Take-Two Interactive (TTWO)

The money customers paid, before any costs are taken out. Each bar is one quarter or, on the annual view, a full financial year; the last annual bar may be the trailing twelve months, which the footnote marks.

What good looks like. Growth that repeats, rather than one strong year carrying the chart, and a trailing twelve months keeping pace with the last full year.

If it rises or falls. Revenue is the hardest line to flatter, so a rise is the most trustworthy kind of growth. A fall puts pressure on every margin below it, because costs rarely come down as quickly as sales do.

What is left after every cost, including tax and interest. The bottom line of the income statement.

What good looks like. Profit growing at least as fast as revenue, which means the business is keeping more of each sale as it gets bigger.

If it rises or falls. Profit can move for reasons revenue cannot explain - a one-off charge, a tax change, a write-down - so a single sharp year is worth checking against the margin chart before reading it as a trend.

How much revenue and earnings changed against the year before - the trailing twelve months against the twelve before them at each quarter, or one point per fiscal year. It is the speed of the business, not its size.

What good looks like. The earnings line above the revenue line: profits growing faster than sales means each new dollar of sales arrives more profitably than the last.

If it rises or falls. A high growth rate off a small base is easy and gets harder every year, so slowing growth in a large business is normal rather than a warning. Earnings falling while revenue grows is the combination worth understanding: costs are rising faster than sales.

What survives at three points on the way down the income statement: after the direct cost of the product, after the cost of running the company, and after everything.

What good looks like. Margins that hold or widen as the business grows. The level itself varies enormously by industry, so the shape over time tells you more than the number.

If it rises or falls. A widening margin means pricing power or costs under control. A compressing one means the opposite, and it compounds: on large revenue, two points of margin is a great deal of profit.

Reported profit against the cash the business actually collected from operating. Profit is an accounting judgement; cash is not.

What good looks like. Cash at or above profit, year after year. Depreciation and other non-cash charges usually push cash above profit, so roughly 100% or more is healthy.

If it rises or falls. Cash falling behind profit for more than a year is the classic early warning: the sales are booked but the money has not arrived, and it shows up in receivables and inventory. For a lender the comparison behaves differently, because a growing loan book consumes cash.

Two returns side by side: on shareholders' capital (ROE), and on all the capital in the business including debt (ROCE).

What good looks like. Both comfortably above roughly 10%, and close together. A wide gap means borrowing, not operations, is doing the work.

If it rises or falls. A high ROE built on debt looks like quality until the debt has to be refinanced. ROCE is the harder number to flatter, which is why both are shown.

One year of revenue, with each major cost taken out in the order the income statement takes it, ending at net profit.

What good looks like. No single step swallowing a surprising share, and a bottom line that survives all of them.

If it rises or falls. The largest step is where the business really spends its money, and it is the one to watch year to year: a step that grows faster than revenue is what margin compression looks like before it reaches the margin chart.

Free cash flow as a share of revenue: how much of each dollar of sales survives both costs and capital spending.

What good looks like. A steady or rising share. Asset-light businesses convert far more than manufacturers, so compare a company with itself.

If it rises or falls. Falling conversion while revenue grows means growth is being bought with capital spending or working capital, which is fine while it lasts and painful when it stops.

Capital spending, research and development, and stock compensation, each as a share of revenue. The three ways a business pays to keep its position.

What good looks like. A share that is stable or falling while revenue grows, which means the cost of competing is not rising with the business.

If it rises or falls. Rising intensity means each new dollar of sales is getting more expensive to win. Falling intensity can mean efficiency, or it can mean under-investment that shows up years later.

How often operating profit grew faster than revenue, year by year. Fixed costs mean profit should rise faster than sales once those costs are covered.

What good looks like. Profit outgrowing revenue in most years, and by a widening margin in the good ones.

If it rises or falls. Leverage cuts both ways: the same fixed costs that multiply profit on the way up multiply the damage when sales fall. A business with strong operating leverage is a better business and a more volatile one.

The same return as the card above, but every filed year, against a 10% line that stands in for what capital costs.

What good looks like. Years above the line, and a trend that is flat or rising rather than drifting down towards it.

If it rises or falls. A business earning above its cost of capital creates value by growing; one earning below it destroys value by growing. The 10% line is a convention, not a law, so read the distance from it rather than the crossing.

Total borrowings against cash on hand, with debt as a multiple of shareholders' equity, and how many times profit covers the interest bill.

What good looks like. Interest covered comfortably - roughly eight times or more - and debt that is not a large multiple of equity.

If it rises or falls. Debt is only a problem when it has to be repaid or refinanced in a bad year, so cover matters more than the amount. Rising debt with rising cover is a business borrowing to grow; rising debt with falling cover is the combination that ends badly.

Current assets over current liabilities: what the company can turn into cash within a year against what it owes within a year.

What good looks like. Comfortably above 1.0, and not falling year after year. Below 1.0 means near-term bills exceed near-term resources, which is normal for some business models and a warning in others.

If it rises or falls. Inventory and receivables build it up; short-term borrowing and payables pull it down. A retailer that turns stock over quickly can run lower than a manufacturer and be perfectly sound.

Operating profit divided by interest expense - how many times over the year's earnings could pay the year's interest.

What good looks like. High and steady. Five times is a common floor; comfortably above it means the debt is being carried, not merely serviced.

If it rises or falls. It falls when profit falls or when borrowing costs rise, and a company can look safe on the level while the direction is telling you otherwise.

Operating cash flow as a share of revenue: of every dollar sold, how much reached the bank before capital spending.

What good looks like. A high share, holding up or improving. It is the clearest sign that reported profit is real.

If it rises or falls. It falls when customers take longer to pay or stock builds up, and it can stay high while profit falls - which is usually the more reassuring of the two.

What would be left for shareholders if every asset were sold at its book value and every debt repaid. Book value, in other words.

What good looks like. Equity growing as retained profits build up, unless the company is deliberately returning more than it earns.

If it rises or falls. Equity falls for two very different reasons: buybacks, which return money to you, and losses, which do not. The distinction is the whole story, and negative equity means liabilities now exceed assets, which makes debt-to-equity and return on equity meaningless rather than alarming.

Cash returned through buybacks and dividends, alongside the value of new shares issued to employees as compensation.

What good looks like. Returns comfortably larger than stock compensation, so the share count actually falls.

If it rises or falls. A company can announce billions in buybacks while issuing nearly as much stock to staff, and the two largely cancel. What reaches you is the net effect, which is why both bars are here rather than only the buyback.

Open-market buys and sells by the company's own officers and directors, from their Form 4 filings. Grants, option exercises and shares withheld for tax are excluded, because they are compensation rather than decisions.

What good looks like. Buying with their own money, which is the one insider action that is hard to explain away.

If it rises or falls. Selling is weak evidence: insiders sell to diversify, to buy houses, and on pre-scheduled plans set months ahead. Buying is stronger evidence, because there is only one reason to do it. The absence of any buying over a long stretch is itself worth noticing.