The Income Statement - KEY POINTS

The Income Statement is a summary of company profitability over a certain period of time.

Profitability: the difference between revenues and expenses generated by a company’s activities.

Under accrual accounting, revenues are recognized when an economic exchange occurs, and expenses associated with a product are matched during the same period as revenue generated from that product.

Special care must be taken to distinguish operating expenses (stemming from core activities) from non-operating costs (arising from peripheral transactions) in arriving at a company’s net income.

Net income is an important indicator of a company’s operating performance.

Analysts focus on EPS, EBIT, and EBITDA as metrics for a company’s profitability.