What is a Business Financial Statement?

The income statement is a simple and straightforward report on a business' cash-generating ability. It's an accounting scorecard on the financial performance of your business that reflects quantity of sales, expenses incurred and net profit. It draws information from various financial categories, including revenue, expenses, capital (in the form of depreciation) and cost of goods. By combining these elements, the income statement illustrates just how much income your company makes or loses during the year by subtracting cost of goods and expenses from total revenue to arrive at a net result, which is either a profit or a loss.

What is included in a Business Financial Statement?

An income statement lists financial projections in the following format:

• Income includes all revenue streams generated by the business.
• Cost of goods includes all the costs related to the sale of products in inventory.
• Gross profit margin is the difference between revenue and cost of goods.
• Gross profit margin can be expressed in dollars, as a percentage, or both.
• As a percentage, the gross profit margin is always stated as a percentage of revenue.
• Operating expenses include all overhead and labor expenses associated with the operations of the business.
• Total expenses are the sum of cost of goods and operating expenses. Net profit is the difference between gross profit margin and total expenses.
• The net income depicts the business' revenues and debt.
• Depreciation reflects the decrease in value of capital assets used to generate income.
• It's also used as the basis for a tax deduction and an indicator of the flow of money into new capital.
• Earnings before interest and taxes shows the capacity of a business to repay its obligations.
• Interest includes all interest payable for debts, both short-term and long-term.
• Taxes includes all taxes on the business.
• Net profit after taxes shows the company's real bottom line.

Sources: https://www.entrepreneur.com/encyclopedia/income-statement