Income Statement

Definition

The Income Statement, one of the three core Financial Statements, reports a company’s financial performance and profitability over a specific period (e.g., quarter or year). It follows Accrual Accounting principles.

Purpose

The IS allows for the analysis of a company’s historical growth trends and operational performance. It shows whether the company made a profit or loss during the reporting period.

Structure

The statement begins with Revenue (the “top line”) and subtracts various costs and Expenses to arrive at Net Income (the “bottom line”). Key components typically include:

1. Net Revenue (Sales)
2. Cost of Goods Sold (COGS)
3. Gross Profit
4. Operating Expenses (SG&A, R&D)
5. EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization)
6. Depreciation & Amortization (D&A)
7. Operating Income (EBIT - Earnings Before Interest and Taxes)
8. Interest Expense, net
9. Pre-Tax Income (EBT - Earnings Before Tax)
10. Tax Expense
11. Net Income

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See also: Balance Sheet, Cash Flow Statement