Income Statement: Critical Summary of Financial Performance

Think of an income statement as the summary of a company’s financial performance over a specific time period. It basically provides a structured overview of how a business generates revenues and how much it spends on operating expenses and non-operating expenses such as those related to interest charges, restructuring and employee benefits. An income statement also lists the net profit or net loss recorded by a company after accounting for all expenses during the specified period.

The income statement is also called “revenue and expense” statement or “profit and loss statement” in certain parts of the world. Unlike a balance sheet, which provides a comprehensive overview of a company’s financial health at a specific moment, an income statement specifically focuses on income and expenses. Financial analysts often look at the income statement to determine how well or how poorly a company is managing its operating expenses. Investors and creditors use income statements to gauge the financial health of a company, to asses cash flows, predict future performance and for other strategic planning purposes.

To learn more about income statements and how to prepare them in a legally compliant fashion please contact the financial analysts at The Carleton Group, a management consulting firm that is based in Moorpark, California.