Income statement explained

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What is an income statement? An income statement is an overview of how much a company has earned during a period. In analyzing the financial performance of a company, the income statement is where most people spend a lot of time.

⏱️TIMESTAMPS⏱️
00:00 Understanding the income statement
01:06 Income statement case study
02:53 Top line and bottom line
03:27 Revenue
04:23 Cost of revenue
05:55 Gross margin
06:23 Operating expenses
07:53 Operating income
08:27 Other income
08:55 Provision for income taxes
09:43 Net income
10:42 Earnings per share

The income statement is known under many names, each of these gives a hint of what we are trying to review in this income statement tutorial: consolidated statement of earnings, profit and loss statement, earnings report, statement of operations, statement of financial performance, or simply: the income statement. So in case you are unable to find the income statement for a company, try a search with any of these other names!

Learning how to read an income statement is just like learning how to read anything else: I encourage you to go through lots of real world income statements for companies that you are interested in. By reviewing the income statement, and the notes that come with it in the annual report, you will at the same time learn a lot about how the business works.

Let me show you how to read an income statement, using the financial statements of Microsoft as an example.

To get a quick first impression, we take a look at revenue at the top of the #incomestatement, and net income at the bottom of the income statement. Also known as the top line and the bottom line. Net sales billed, and turnover, are sometimes used by other companies as a synonym for revenue. Net earnings and net profit are sometimes used as a synonym for net income. If CEOs or analysts discuss how revenue and net income have developed, they often refer to top line growth and bottom line growth.

Philip de Vroe (The Finance Storyteller) aims to make #accounting, #finance and investing enjoyable and easier to understand. Learn the business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better investing decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

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Sir, I am taking an accounting class for summer and found out your videos. Thanks for explaining these:)

baharozbeyli

Thank you for such a fantastic outline of what the income statement is and what to look at while analyzing. I am a visual learner and therefore the provided case study and zooming in on what is to be looked at really helped. Hartelijk dank

dubailove

Oh my goodness. The right video and it seems the right channel I have been looking for to educate myself.

suprafan

Hello - I have just discovered your Channel and watched this video. It is absolutely fantastic ! The amount of information provided is just right, the speed and clarity of delivery is just right, the length of the video is just right. Thank you very much for giving me one of the clearest explanations of the income statement. I will look forward to studying your other material. Best Regards,

rezapanah

Mate, your videos work so well for me. The examples at the start just help me learn, and I don't know how or why that is so effective. Context must be everything for me. Thanks.

TheStalec

Thank you for the walkthrough, really informative.

If you ever could, please make a video going through everything in an annual financial report. From start to bottom. Would like to see your insight as you go along reading the employees messages, the financial numbers, notes etc...

Naz-yibs

YOU ARE AN ACCOUNTING ANGEL SENT FROM GOD...

shuggy

Thanks for sharing your videos! I just gave my brother a link to your financial statements playlists since he asked me about public company valuation. Do you have any plans to release any videos on how to build a financial model or how to do financial modeling overall?

xenitram

As good as fk, I am trying to learn the financial statement from scratch for investment purposes. Most material like Textbook or MIT open-course doesn't have a solid example. They just throw me tons of undefined terms for me to decode. Truly appreciated Sir.

ivanlo

what would be a good example of other income? Something like property value increasing?

jakebendall

This was awesome! This motivated me to upload my own take on The Income Statement! 📈 Would love your feedback and support. Keep on inspiring and spreading the knowledge!🧠

DeepDataInvesting

Hello sir I am a non accounting student and would like to know the two important information captured in the financial performance statement and financial position statement most useful to the users

sheenalpriyanka

Delighted! Well taught to analyse Microsoft. Can you analyse how long can Microsoft sustain this performance?

princejag

Dear Sir, I am given some figures as exercise. I feel like to ask 2/3 items please. I have net value of vehicles at year end, Balance at bank and depreciation. I think I should leave the 2 figures, Vehicule value and Bank balance for Balance sheet and depreciation as expense in Income statement. Am I right ? Heppy to know you online. You are great!

moondust