Financial Statement Analysis

Income Statement
Unit 2.1
Income Statement
An income statement is a financial statement that shows you how
profitable your business was over a given reporting period. It shows
your revenue, minus your expenses and losses.
Also sometimes called a “net income statement” or a “statement of
earnings”, the income statement is one of the three most important
financial statements in financial accounting, along with the
balance sheet and the cash flow statement (or statement of cash
flows).
How to make an Income Statement
• CALCULATE YOUR REVENUE Further explanation is given in recorded
lecture of this unit
• DETERMINE COST OF GOODS SOLD
• CALCULATE THE GROSS MARGIN
• INCLUDE OPERATING EXPENSES
• CALCULATE YOUR INCOME
• INCLUDE INCOME TAXES
• CALCULATE NET INCOME
• FINALIZE THE INCOME STATEMENT
Importance of Income Statement
An income statement is important because it offers a recent picture of the
company's revenues and expenses and overall profitability. Managers and in-
vestors can use this information to make financial decisions.