Income Statement

The income statement is the financial report showing a company's revenue, costs, and resulting profit over a period — a quarter or a year. It reads as a waterfall: revenue at the top, then successive subtractions down to net income at the bottom.

The standard flow: revenue minus cost of goods sold gives gross profit; minus operating expenses gives operating income; minus interest and taxes gives net income. Each step defines a margin, and each margin isolates a different question — product economics, operating efficiency, and total profitability.

It is built on accrual accounting: revenue is booked when earned, not when cash arrives. That is why a company can report a profitable quarter while cash goes out the door — and why the income statement is read alongside the cash flow statement, not instead of it.