An income statement, also known as a profit and loss statement or P&L, is a financial document that shows a company’s revenues and expenses over a specific period of time, typically a month or a year. The purpose of an income statement is to show how much profit a company has made (or lost) during that period.
The difference between the company’s total revenues and its total expenses is its net income (or loss). If the company’s expenses are greater than its revenues, it has a net loss. If the company’s revenues are greater than its expenses, it has a net income.
The income statement also includes a bottom line, which is the company’s net income (or loss) after taxes. This is the final profit (or loss) that the company has made during the period covered by the income statement.
Gross profit is the company’s total revenues minus the cost of goods sold. It represents the profit the company has made from selling its products or services before taking into account other expenses, such as selling and marketing expenses and administrative expenses.
In summary, an income statement is a financial document that shows a company’s revenues and expenses over a specific period of time. It helps to determine the company’s net income (or loss) and provides important information about the company’s financial performance. It’s an important tool for both company management and investors, but it’s just one piece of the puzzle when it comes to understanding a company’s financial health.