Income Statement Summary

The income statement summarizes the profit of the company over a period of time, usually either a quarter or a full year. The statement begins with the revenue earned during that time, subtracting expenses until it reaches retained earnings. Retained Earnings is the businesses true profit at the end of each statement, and a business should never be considered profitable unless this figure is positive while cash assets have increased.

An increase in cash while retained earnings are positive is important. Companies usually report that they are profitable, but that profit does not mean they actually increased cash. A company could report an increase in assets but have it be entirely accounts receivable, which means they haven’t received a dime for the sales. The important factor is always going to be the reception of cash with an increase in retained earnings. This results in actual real profit.