Financial Intelligence, Revised Edition: A Manager's Guide to Knowing What the Numbers Really Mean

9

The Many Forms of Profit

So far we have covered sales or revenue—the top line—and costs and expenses. Revenue minus costs and expenses equals profit.

Of course, it might also equal earnings, income, or even margin. Amazingly enough, some companies use all these different terms for profit, sometimes in the same document. An income statement might have items labeled “gross margin,” “operating income,” “net profit,” and “earnings per share.” All these are the different types of profit typically seen on an income statement—and the company could just as easily have said “gross profit,” “operating profit,” “net profit,” and “profit per share.” When they use different words right there in the same statement, it looks as if they are talking about different ...