How to read an income statement


  • Total revenue: Money brought in from sales of goods and services
  • Cost of goods sold: Amount of money spent to buy or create products sold
  • Gross profit = Total revenue – Cost of goods sold
  • Operating expenses: salaries, marketing, rent – can’t be linked directly to the production of goods and services
  • Operating income: Money from core operations
  • Other income/expenses: Interest from savings accounts, interest on loans
  • Net income = Income before tax – income tax
  • Net income is known as the bottom line

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