What this lesson is about
Revenue is the top line, net income is the bottom line. Everything in between is where the real story lives.
Part 1 of 2
Revenue is the top line. Net income is the bottom line. The income statement shows you what happens in between. Start with revenue. Subtract cost of goods sold to find gross profit. Next, subtract operating expenses for operating income. Finally, take out interest and taxes to get net income.
A company's real story often lives in that middle section. Two companies can report the same revenue but have very different net incomes. It all depends on their cost structures.
Quick check
What does an income statement measure?
Unlike the balance sheet's single-moment snapshot, the income statement covers an entire stretch of time.
Part 2 of 2
Quick check
What is 'gross profit'?
Gross profit only strips out direct production costs - operating expenses, interest, and taxes come out further down the statement.
Test what you just learned. Correct moves you up, wrong moves you down - reach 100 to master this lesson.