Business Analysis with Microsoft® Excel, Second Edition

Using the Income Statement

The income statement is a powerful tool for decision making. It portrays the flow of money and the relationship of revenues to expenses over a period of time. It tells us how much money was made in a year. The terms profit, net income, and earnings are commonly used to state the bottom line.

The income statement provides a starting point in the analysis of a business. The popular press frequently reports earnings and nothing more: “Today, U.S. Widgets reported quarterly income of $240 million.” This is positive, but there is more to the story.

Businesses need to measure and report income. This sounds straightforward enough, but it gets complex in a hurry. Both measurement and reporting can, and are, complex enough to ...