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An income statement is a type of financial statement that offers a summary of the financial performance of a company over a certain time period. Other names for it include a statement of operations or a profit and loss (P&L) statement. A company's sales, costs, and consequent net income or loss are all displayed on the statement for the relevant time period.
The income statement is broken down into two main sections: the top portion, which displays the company's revenue for the period, and the bottom section, which displays its expenses. Net income or loss is determined by the sum of revenue and expenses.
The first item on the income statement is often the revenue, which is the money a business makes through the selling of its goods or services. The cost of goods supplied, salaries and wages, rent, utilities, and advertising are just a few examples of the items that the company incurs as expenses in order to produce income.
Because it informs stakeholders and investors about a company's profitability and revenue generation capacity, the income statement is crucial. Investors can learn more about the company's financial situation and make educated decisions about whether to buy its stock by examining the income statement.
