Income Statement


DEFINITION of 'Income Statement'

A financial statement that measures a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year.

Also known as the "profit and loss statement" or "statement of revenue and expense."


Loading the player...

BREAKING DOWN 'Income Statement'

The income statement is the one of the three major financial statements. The other two are the balance sheet and the statement of cash flows. The income statement is divided into two parts: the operating and non-operating sections.

The portion of the income statement that deals with operating items is interesting to investors and analysts alike because this section discloses information about revenues and expenses that are a direct result of the regular business operations. For example, if a business creates sports equipment, then the operating items section would talk about the revenues and expenses involved with the production of sports equipment.

The non-operating items section discloses revenue and expense information about activities that are not tied directly to a company's regular operations. For example, if the sport equipment company sold a factory and some old plant equipment, then this information would be in the non-operating items section.

To know more about income statement and how to use them in investment selection, please read Understanding The Income Statement and Find Investment Quality In The Income Statement.

  1. Receivables Turnover Ratio

    An accounting measure used to quantify a firm's effectiveness ...
  2. Revenue

    The amount of money that a company actually receives during a ...
  3. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  4. Discontinued Operations

    A segment of a company's business that has been sold, disposed ...
  5. Financial Statements

    Records that outline the financial activities of a business, ...
  6. Expense

    1. The economic costs that a business incurs through its operations ...
Related Articles
  1. Investing Basics

    The Importance of Dividends in Your Portfolio

    Learn some of the primary reasons why dividends constitute a critical factor in the overall performance of a stock investor's portfolio.
  2. Personal Finance

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  3. Fundamental Analysis

    The One-Time Expense Warning

    These income statement red flags may not spell a company's downfall. Learn why here.
  4. Options & Futures

    Find Investment Quality In The Income Statement

    Use these key attributes to uncover top-level investments.
  5. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  6. Markets

    Cleaning Up Dirty Surplus Items On The Income Statement

    Dirty surplus items can skew net income. Knowing how to account for them will give you a cleaner picture.
  7. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  8. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  9. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  10. Economics

    Calculating Days Working Capital

    A company’s days working capital ratio shows how many days it takes to convert working capital into revenue.
  1. Are dividends considered an expense?

    Cash or stock dividends distributed to shareholders are not considered an expense on a company's income statement. Stock ... Read Full Answer >>
  2. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  3. What is the difference between recurring and non-recurring general and administrative ...

    The difference between recurring and nonrecurring general and administrative expenses can best be understood as the difference ... Read Full Answer >>
  4. How do you record adjustments for accrued revenue?

    An accountant records adjustments for accrued revenues through debit and credit journal entries in defined accounting periods ... Read Full Answer >>
  5. What is the average return on equity for a company in the retail sector?

    The retail sector includes automotive; building supply; distributors; general; grocery and food; online; and special lines ... Read Full Answer >>
  6. What is the difference between accrued revenue and unrealized revenue?

    There is no difference between accrued revenue and unrealized revenue. It's possible that the confusion arises from the difference ... Read Full Answer >>
  7. How is accrued revenue accounted for in bookkeeping?

    When it comes to bookkeeping, accrued revenue is accounted for on a company's balance sheet in the form of an accrued revenue ... Read Full Answer >>
  8. How is abatement cost accounted for on financial statements?

    Abatement costs are accounted for on a company's financial statements through increases in either cost of goods sold or operational ... Read Full Answer >>
  9. What are typical examples of capitalized costs within a company?

    Typical examples of capitalized costs are expenses associated with constructing a fixed asset and include materials, sales ... Read Full Answer >>
  10. How is cash flow from operating activities calculated?

    Cash flow from operating activities can be calculated directly or indirectly. Either way, cash from operating activities ... Read Full Answer >>
  11. What is an aggregate limit and what type of insurance is it usually associated with?

    Tangible assets can be liquidated and turned into cash, if necessary. In high-risk industries or high-risk business situations, ... Read Full Answer >>
  12. What types of information does one need to perform a thorough financial analysis?

    To perform a thorough financial analysis, an analyst would need to calculate and analyze ratios based on numbers found on ... Read Full Answer >>
  13. Which pro forma financial statements should always be included in a business plan?

    When deciding which pro forma financial statements should be included in a business plan, it is important to always include ... Read Full Answer >>
  14. How do operating expenses affect profit?

    As a general rule, an increase in any type of business expense lowers profit. An income statement has three levels of profit, ... Read Full Answer >>
  15. Why should I look at other aspects of the company, rather than just the bottom line?

    There are two very good reasons why investors and analysts examine aspects of a company beyond simply looking at the bottom ... Read Full Answer >>
  16. What are direct costs of sales?

    Direct cost of sales, or cost of goods sold (COGs), measures the amount of cash a company spends to produce a good or a service ... Read Full Answer >>
  17. When is accrual accounting more useful than cash accounting?

    The accrual accounting method is more useful than the cash accounting method when a person or company is trying to understand ... Read Full Answer >>
  18. How does accumulated depreciation affect net income?

    Accumulated depreciation does not directly affect net income but is instead the total amount of a company's depreciation ... Read Full Answer >>
  19. What is accounting fraud?

    Accounting fraud is intentional manipulation of financial statements to create a facade of a company's financial health. ... Read Full Answer >>
  20. How are the three major financial statements related to each other?

    The information found on the financial statements of an organization is the foundation of corporate accounting. This data ... Read Full Answer >>
  21. What is the difference between a cash flow statement and an income statement?

    The cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a ... Read Full Answer >>
  22. What does a high times interest earned ratio signify with regard to a company's future?

    A common solvency ratio utilized by both creditors and investors is the times interest earned ratio. Often referred to as ... Read Full Answer >>
  23. What's the difference between an income statement and a balance sheet approach?

    The three main financial statements regularly produced by publicly traded companies are the income statement, balance sheet ... Read Full Answer >>
  24. What's the difference between cost of goods sold (COGS) and cost of sales?

    Fundamentally, there is almost no difference between a company's listed cost of goods sold (COGS) and cost of sales, otherwise ... Read Full Answer >>
  25. What are the main differences between single step and multiple step income statements?

    An income statement is a financial summary of a company's financial operations over a set period of time. However, not all ... Read Full Answer >>
  26. When should a company recognize revenues on its books?

    When a company makes revenues from its operations, it must be recorded in the general ledger and then reported on the income ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!