Income Statement

AAA

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."

INVESTOPEDIA EXPLAINS '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.

VIDEO

Loading the player...
RELATED TERMS
  1. Discontinued Operations

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

    Records that outline the financial activities of a business, ...
  3. Revenue

    The amount of money that a company actually receives during a ...
  4. Common Size Income Statement

    An income statement in which each account is expressed as a percentage ...
  5. Receivables Turnover Ratio

    An accounting measure used to quantify a firm's effectiveness ...
  6. Selling, General & Administrative ...

    Reported on the income statement, it is the sum of all direct ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
  7. 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 >>
Related Articles
  1. Personal Finance

    Breaking Down The Balance Sheet

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

    The One-Time Expense Warning

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

    Find Investment Quality In The Income Statement

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

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  5. 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.
  6. 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.
  7. Options & Futures

    Advanced Financial Statement Analysis

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

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  9. Fundamental Analysis

    What's Fair Value?

    Fair value has three different meanings depending on the context.
  10. Investing

    Understanding Accumulated Depreciation

    Depreciation is a rough approximation, in dollar terms, of the wear and tear on an asset. So the accumulated depreciation is the aggregate of the wear and tear on the asset from all prior time ...

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center