Mastering Income Statement Basics Simplified

An *income statement* is a financial report that summarizes a company's revenues, expenses, and profits (or losses) over a specific period, such as a quarter or a year. It provides a snapshot of the company's financial performance by showing how much money it earned (revenue), how much it spent (expenses), and the resulting net income (profit) or net loss. The income statement typically includes: 1. **Revenue/Sales**: Total income generated from selling goods or services. 2. **Cost of Goods Sold (COGS)**: Direct costs associated with producing goods or services sold. 3. **Gross Profit**: Revenue minus COGS. 4. **Operating Expenses**: Costs related to running the business (e.g., salaries, rent, utilities). 5. **Operating Income**: Gross profit minus operating expenses. 6. **Other Income/Expenses**: Non-operating items like interest or investment gains/losses. 7. **Net Income**: The final profit or loss after all revenues and expenses are accounted for. The income statement is a key tool for assessing a company's profitability and financial health.