(Excerpts from Financial Intelligence, Chapter 6 – Cracking the Code of the Income Statement)
No matter whose income statement you’re looking at, there will be three main categories. One is sales, which may be called revenue (it’s the same thing). Sales or revenue is always at the top, costs and expenses are in the middle, and profit is at the bottom.
You can usually tell what’s important to a company by looking at the biggest numbers relative to sales. For example, the sales line is usually followed by “cost of goods sold,” or COGS. If that line is a large fraction of sales, you can bet that management in that company watches COGS very closely.
