An income statement is a financial statement that reports a company's revenue, expenses, and net income (or loss) over a specific period of time, such as a quarter or a year. It provides a summary of the company's financial performance during that period.
The income statement starts with the company's total revenue from sales of goods or services. Then, the cost of goods sold and other expenses, such as operating expenses, interest expenses, and taxes, are subtracted from the revenue to arrive at the net income (or loss) for the period.
The income statement provides insights into a company's profitability and helps investors, analysts, and creditors to evaluate its financial health. By analyzing the income statement, stakeholders can assess a company's ability to generate profits, manage its expenses, and grow its business over time.
Some key metrics that can be derived from the income statement include gross profit margin, operating income margin, net income margin, and earnings per share (EPS). These metrics can be used to compare a company's financial performance to that of its competitors or industry benchmarks, and to assess its overall financial health.