What You Can Find in the Income Statement

The income statement is packed with information that tells the story of a company's profitability. Let's dive deeper into specific line items you will encounter.

Sales or Revenue

The first line of the income statement. It represents the value of all goods and services sold during the period.
Gross Sales is the total amount, while Net Sales deducts returns and allowances.

Cost of Goods Sold (COGS)

This includes the direct costs of producing the goods sold by a company. It includes material costs, direct labor, and manufacturing overhead. It does not include indirect expenses like distribution costs and sales force costs.

Selling, General, and Administrative Expenses (SG&A)

These are the operating expenses not directly tied to production.

Selling Expenses: Advertising, sales commissions, delivery costs.
General & Administrative: Executive salaries, legal fees, rent, utilities (for non-production facilities).

Depreciation and Amortization

Depreciation spreads the cost of tangible assets (like machinery) over their useful life. Amortization does the same for intangible assets (like patents). These are non-cash expenses that reduce reported earnings but don't impact cash flow directly in the current period.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization. This is a commonly used metric to evaluate a company's operating performance without the impact of financing decisions, accounting decisions, or tax environments.