How to read a companies income statement

 The income statements is one of the three financial statements a public company releases every quarter. The income statement will show the profitability of a company, it will show income and operating costs. This is especially important when considering investing in a company for it's dividend- You will be able to see if the company can keep up and increase the dividend .. or if they are in over their heads.

This will be a line by line breakdown of Apples most recent income statement and what all the numbers mean.

On most websites it will give you the option to sort the data annually or quarterly- It is important to know that the number represented here are in the 000's. Meaning $200,000,000 is not 200 million but rather 200 Billion.


The first section of the income statement will look like this


Total Revenue- Price of goods times the quantity sold.
Cost of revenue- Total price is costs to manufacture and deliver goods.
Gross profit- Total profit after cost of revenue is factored in.   Total revenue - Cost of revenue = Gross profits


The next section will be larger.


Research and development- Money a company uses towards innovation and improvements of the company.
Sales and general admin- The sum of all direct and indirect selling expenses. This could include stuff such as utility bills, lease payments, vehicle rentals etc.
Non recurring items- Any one time payment that they are not expected to pay again- this could include litigation fees, write offs, bad debt or worthless assets.
Other operating items- Any operating expense that does not fall under a category above.
Operating income- Is a measurement that shows how much of a companies revenue will eventually become profit.         

Operating income = gross income - operating expenses

Earnings before interest and tax- All earnings before taxes and interest are deducted.
Interest expenses- A cost incurred by the company for borrowed funds.
Earnings before taxes- Revenue minus expenses. Excludes taxes.
Income tax- Revenue a company owes to the internal revenue services.
Minority interest- is ownership of less than 50% of a subsidiary's equity by an investor or a company other than the parent company
Equity earnings/Subsidiaries'- Money earned/lost by a subsidiary (a company owned by a parent company, I.E Proctor and Gamble owns Old spice)
Net Income-Continuous operations- referring to the tasks/cost required to make a product or service and deliver it to a customer

Net income- Revenue - expenses
Net income applicable to shareholders- The bottom line profit that belongs to the shareholders.


If your interested in learning how to read other financial statements- You can learn here!

Balance sheet
http://modernstockinvesting.blogspot.com/2018/09/how-to-read-balance-sheet.html

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