Statement of Comprehensive Income
Statement of Comprehensive Income
The income statement tells you the performance of your company. It shows the revenues earned and related expenses covering a certain period like fiscal year. The statement is designed to show you if you made a profit. Understanding an income statement is essential for investors to analyse the profitability and future growth of a company, which should play a huge role in deciding whether to invest in it.
- Sales Refers to the revenue earned when a company sells its goods, products, merchandise, etc. That revenue that comes in from activities outside the company’s core operations is referred to as “Other Revenue”
- Cost of sales Cost of goods sold (COGS) are the direct cost attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labour costs used to produce the good.
- Gross profit A business’ gross profit is its sales revenue minus the cost of goods sold. The gross profit comes from the mark-up or profit margin on the products you sell. Notice that gross profit is concerned only with how much the business sold and what it cost the business to buy the sold products or the cost of the materials to produce.
- Expenses Expense can be fixed or variable. Fixed overhead expenses are the same from month to month. Some can be variable, meaning they increase or decrease depending on the business’s activity level.
- Net profit/ loss Net profit is calculated by subtracting a company’s total expenses from the total revenue, thus showing what the company has earned or lost in each period. If the overhead costs exceed the total revenue this results in a net loss. Even though a company can sell lots of products at a high profit margin, but if the expenses are too high, the result is therefore a net loss. Going from loss to a net profit can be accomplished by increasing sales and gross profit without increasing expense, cutting back on business expenses or a combination of the two.
