📉 The Income Statement: From Top Line to Bottom Line

The structure of an income statement is designed to show how much money is "chipped away" by expenses at each stage of the business.

1. The Top Line: Revenue (Sales) 💵

This is the total amount of money brought in from selling goods or services.

It is "gross" because no costs have been deducted yet.

Investors look for Revenue Growth to see if the company's "neighborhood" is expanding.

2. The Direct Costs: Cost of Goods Sold (COGS) 🛠️

These are the direct expenses required to produce what was sold (e.g., raw materials, factory labor).

Gross Profit: This is what remains after subtracting COGS from Revenue ($Revenue - COGS$).

Gross Margin: Expressed as a percentage, it tells you how efficiently the company makes its products.

3. The Running Costs: Operating Expenses (OpEx) 🏢

These are the indirect costs of staying in business, often grouped as SG&A (Selling, General, and Administrative).

Examples: Office rent, marketing, research and development (R&D), and executive salaries.

Operating Income (EBIT): This is Gross Profit minus OpEx. It shows the profit from "core" business operations before math gets complicated with taxes and interest.

4. The Final Deductions: Interest and Taxes 🏦⚖️

The company must pay its lenders (Interest Expense) and the government (Income Tax).

EBT: Earnings Before Tax.

5. The Bottom Line: Net Income (Net Profit) 🏆

This is the final "final draft." It is the actual money left over for the owners.

If this is positive, the company is profitable.

If it is in parentheses or red, the company is operating at a Net Loss.
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