Accounting is the language of business.
As an investor you MUST know how to read an income statement.
I'll teach you everything in 2 minutes:
As an investor you MUST know how to read an income statement.
I'll teach you everything in 2 minutes:
An income statement tells you how profitable a company is.
It helps you understand what a company earns and what expenses the business consumes.
It helps you understand what a company earns and what expenses the business consumes.
Here you can see the different sections of an income statement:
Revenue = what a company earns from selling its products
COGS = The costs to produce a product or service
COGS = The costs to produce a product or service
Gross profit = Revenue - COGS
Gross profit is an important metric. It is often shown as a % (gross margin).
Gross margin = (Revenue - COGS) / COGS
Gross profit is an important metric. It is often shown as a % (gross margin).
Gross margin = (Revenue - COGS) / COGS
Operating expenses = all business expenses that are not a cost of goods sold.
Good examples of operating expenses are rent, software and payroll
Good examples of operating expenses are rent, software and payroll
Net operating income = Gross profit - operating expenses
Other income = earnings from non-traditional business activities
Other income = earnings from non-traditional business activities
Other expenses = expenses consumed from non traditional business activies
Net other income = other income - other expenses
Net other income = other income - other expenses
Net income = Net operating income + Net other income
Net income is also called the bottom line.
Net income is also called the bottom line.
Why is the income statement important?
The income statement helps you understand the true nature of the business.
The more profitable a company, the better.
The income statement helps you understand the true nature of the business.
The more profitable a company, the better.
That's it for today.
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