Business Income Statement
What it is and why it’s important to small business owners.
Definition
An Income Statement is a statement that reflects a company’s financial performance over the course of an accounting period. It lists the revenues and expenses and then calculates the net profit or loss. The Income Statement is split up according to operating and non-operating expenses and revenues.
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How it is Used
The Income Statement allows business owners to evaluate the financial success of their business and clearly see where their revenues and expenses are coming from. Analysts can use the Income Statement to calculate various ratios that are useful for benchmarking a business. Some examples are Return on Equity (ROE) and Return on Assets (ROA). Income Statements can also be used to compare a business’s current performance with that of prior years.
Additional Information
The Income Statement, Balance Sheet, Statement of Retained Earnings and Cash Flow Statement are all interrelated and are prepared in the following order: Income Statement, Statement of Retained Earnings, Balance Sheet, Cash Flow Statement. These four statements make up the cornerstone of a company’s financial statements and help provide important insight into the financial health of a company.
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