$ qubo learn fundamentals/01

The income statement in 10 minutes

track Fundamental analysislevel intermediateread 7 min

The income statement shows what a company earned and spent over a period, usually a quarter or a year. It reads from top to bottom, from sales to profit.

It starts with revenue, the money from sales. Subtracting the direct cost of what was sold gives gross profit; dividing it by revenue gives the gross margin, a sign of pricing power.

Operating expenses such as research, sales and administration come next. What remains is operating income, the profit from the core business. After interest and taxes comes net income, the bottom line.

Dividing net income by the number of shares gives earnings per share (EPS). Markets compare EPS and revenue with analysts’ expectations, much like macro data against consensus.

// rule to remember

revenue − cost of sales = gross profit − operating expenses = operating income

// your turn

Open one US stock page in the Terminal and compute its gross margin from revenue and gross profit, if both are shown.

Educational content only. Not investment advice. Past data does not predict future results. Risk disclosure