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The Income Statement: From Revenue to Net Income

Beginner Investing • 5 min

Revenue is the top line, net income is the bottom line — the whole income statement is what happens in between. Start with revenue, subtract cost of goods sold to get gross profit, subtract operating expenses to get operating income, then subtract interest and taxes to arrive at net income.

A company's real story often lives in that middle section — two companies can have identical revenue and wildly different net income depending on cost structure.

Insider Angle: when revenue is growing but net income isn't, the first place experienced analysts look is which specific expense line is growing faster than revenue — that single line often tells you exactly what's actually going on inside the business.
Try This: Find a company's income statement and calculate its gross margin (gross profit ÷ revenue) and net margin (net income ÷ revenue). Compare the two — how much gets eaten up between gross profit and the bottom line?

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