Income Statement knowledge

Net Income

Calculated as Revenue Sales - COGS = Gross Profit - OpEx = Operating Income- interest expense + interest income - minus taxes

Revenue/Sales

The total income generated from selling goods or services, calculated as Price multiplied by Volume.

COGS (Cost of Goods Sold)

The direct costs attributable to the production of the goods sold by a company, calculated as Cost multiplied by Volume.

OpEx (Operating Expenses)

The costs associated with running the day-to-day operations of a business, also known as fixed costs.

Degree of Operating Leverage

A metric that shows how sensitive a company’s profit is to changes in its sales.

Degree of Operating Leverage Formula

Calculated as Gross Profit / Operating Income.

Growth Rate Formula

(Current - Previous) / Previous

Compound Annual Growth Rate (CAGR)

The rate at which an investment grows annually over a specified period assuming profits are reinvested.

CAGR Formula

(Ending Value / Beginning Value) ^ 1/n-1 -1 where n is the number of years.