How to Read an Income Statement

The income statement summarizes a company’s financial performance over a period, usually a quarter or a full fiscal year.

Revenue is the top line: the total amount the company earned from selling goods or services. Subtracting the cost of generating that revenue gives gross profit.

Below gross profit, operating expenses such as research, sales and administration are deducted to arrive at operating income, which reflects the core business profitability before interest and taxes.

Finally, after interest, taxes and any non-operating items, you reach net income — the bottom line that belongs to shareholders. Comparing net income across several periods shows whether the business is growing its earnings consistently.