Project Alexandria

6.1b Income Statement

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Income Statement

The income statement is a financial report that summarizes a company’s revenues, expenses, and net profit over a specific period. It helps assess a company’s profitability and operational efficiency. In essence, a company’s income statement must equal the formula

The following example shows the trickle-down equation from revenue to net income:

\usepackage{tikz}
\usepackage{amsmath}
 
\begin{document}
 
\begin{tikzpicture}
   % Draw table borders
   \draw (0,-0.55) -- (10,-0.55);
   \draw (0,-3.05) -- (10,-3.05);
   \draw (0,-7.05) -- (10,-7.05);
   \draw (0,-7.15) -- (10,-7.15);
 
 
   % Left column text
   \node[anchor=west] at (0.2,0.2) {\textbf{NET SALES}};
   \node[anchor=west] at (0.2,-0.3) {\textbf{COST OF GOODS SOLD}};
   \node[anchor=west] at (0.2,-0.8) {\textbf{GROSS INCOME}};
   \node[anchor=west] at (0.2,-1.8) {\textbf{SALES \& MARKETING}};
   \node[anchor=west] at (0.2,-2.3) {\textbf{RESEARCH \& DEVELOPMENT}};
   \node[anchor=west] at (0.2,-2.8) {\textbf{GENERAL \& ADMINISTRATIVE}};
   \node[anchor=west] at (0.2,-3.3) {\textbf{OPERATING EXPENSES}};
   \node[anchor=west] at (0.2,-4.3) {\textbf{INCOME FROM OPERATIONS}};
   \node[anchor=west] at (0.2,-5.3) {\textbf{INTEREST INCOME}};
   \node[anchor=west] at (0.2,-5.8) {\textbf{INCOME TAXES}};
   \node[anchor=west] at (0.2,-6.8) {\textbf{NET INCOME}};
 
   % Right column values
   \node[anchor=west] at (7,0.2) {A};
   \node[anchor=west] at (7,-0.2) {B};
   \node[anchor=west] at (7,-0.8) {A - B = C};
   \node[anchor=west] at (7,-1.8) {D};
   \node[anchor=west] at (7,-2.3) {E};
   \node[anchor=west] at (7,-2.8) {F};
   \node[anchor=west] at (7,-3.3) {D + E + F = G};
   \node[anchor=west] at (7,-4.3) {C - G = H};
   \node[anchor=west] at (7,-5.3) {I};
   \node[anchor=west] at (7,-5.8) {J};
   \node[anchor=west] at (7,-6.8) {H + I - J = K};
\end{tikzpicture}
 
\end{document}

The bottom line (i.e., net income) of the income statement flows into the balance sheet under shareholders’ equity.

Revenue Sales Revenue is total income generated from all business activities, including sales.

Graph View