What is Income Statement?

The income statement (or profit and loss statement, P&L) reports a company's revenues, expenses and profits over a specific period, showing whether the business made money and how.

The statement starts with revenue, deducts cost of goods sold to arrive at gross profit, deducts operating expenses for operating profit (EBIT), then deducts interest and tax to reach net profit — the 'bottom line' that flows into retained earnings on the balance sheet.

Investors read the P&L for growth, margin trends and one-off items. Comparing line-by-line against prior periods and peers reveals operational momentum and pricing power.

Example

A retailer's annual P&L shows CHF 5m revenue, CHF 3m COGS (gross profit 2m), CHF 1.5m opex (operating profit 0.5m), CHF 100k interest and CHF 80k tax — net profit CHF 320k.

Related terms

Balance Sheet

The balance sheet is a financial statement that shows a company's assets, liabilities and shareholders' equity at a single point in time, governed by the accounting equation Assets = Liabilities + Equity.

Cash Flow Statement

The cash flow statement reports the actual cash entering and leaving a business over a period, split into operating, investing and financing activities.

Revenue

Revenue is the total income a business generates from selling goods or services before any costs or expenses are deducted, also called the top line.

Operating Profit

Operating profit (or operating income, EBIT) is what a business earns from its core operations after deducting both the direct cost of sales and all operating expenses, but before interest and tax.

Frequently asked questions

How is the income statement different from the balance sheet?+

The income statement covers a period; the balance sheet is a single-day snapshot.

What is the bottom line?+

Net profit (or net income) — what remains after every expense, interest and tax.

Does it show cash?+

No, it uses accrual accounting; the cash flow statement reports actual cash movements.