What does an income statement summarize?

The income statement summarizes the revenues and expenses over a specific period of time, typically within a fiscal quarter or year. This financial document provides a clear picture of the company's profitability by detailing how much money was earned from sales (revenues) and how much was spent on operating costs (expenses). The ultimate goal of the income statement is to show the net profit or loss for the period, which is crucial for stakeholders assessing the company’s financial health and performance.

It includes specific components such as sales revenue, cost of goods sold, and operating expenses, along with earnings before interest and taxes (EBIT), and net income. This focus on the operational results distinguishes the income statement from other financial statements such as the balance sheet, which focuses on assets and liabilities, or the cash flow statement, which addresses cash inflows and outflows.