Cracking the code of the Income Statement
It consists of three main categories:
- Sales or revenue during a given time period. It includes sales (revenue) and Earnings-per-share (EPS)
- Costs and expenses: “Above the line” are the cost of goods sold (COGS), cost of services (COS). “Below the line” are operating expenses, interest, taxes, depreciation and amortization.
- Profit: Profit is an estimate. You can’t spend estimates.
Different kinds of profit:
- Profit = Revenue - expenses
- Gross profit = Sales - COGS
- Operating profit (EBIT) = Gross Profit - Operating expenses
- Net Profit = Operating Profit - (interest + taxes + other costs)
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