What are Income Statements | by Wall Street Survivor

Описание: What is an income statement?
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The income statement tells the story of the business. Performance is measured by how much money the company earned compared to how much it spent. In mathematical terms: revenues - expenses = net income.

To understand why an income statement is important, think of an internet startup that’s run out of the basement of the founder’s parents. Its assets consist of a computer, a desk and fold-out couch—as well as a few pens, some Post-it notes and a coffee cup. Not a very impressive company, and based on its “balance sheet” you wouldn’t give it a second look.

But look again. The company has no real expenses other than pizza and beer, as well as the cost of renting internet server space every month. The site is beginning to generate cash. Each month the hits it gets on its website triple—so its growth prospects are phenomenal. And it has also started to sell its first ads, which could bring in millions.

Suddenly that balance sheet doesn’t matter so much. It’s the “income statement” that really matters.

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