At Venminder we get this question alot. So, here are a few areas that you need to look at first before coming to that conclusion.
4 Areas to Look At
1. Growth Levels - Look at just how much or little did that revenue grow? Is it steadily up or does it look more like a roller coaster?
2. Method of Growth – Determine if the growth was organic or through acquisition. Is there a shift in the company's revenue segments?
3. Operating Income – The first indicator for financial health is gross margin. Unfortunately, a lot of vendors don’t disclose their gross margins, therefore, you need to look at Operating Income to determine your vendor’s performance. Even if you know your vendor's revenue has increased, the Operating Income will tell you whether or not it’s performance has improved.
4. Comprehensive Income – Typically very little attention is devoted to looking at this part of the statement. Comprehensive Income can uncover items that might not be discovered by just looking at the balance sheet or income statement, including the results of foreign exchange translations.