The income statement is a document that allows you to know, among other things, whether a company is profitable or loss-making.
The income statement is an accounting document that reflects the activity of the company and provides details of the expenses consumed and the products generated during a fiscal year. It is a document that is part of the company's financial statements.
A subtraction operation between the income and expenses recorded in the income statement makes it possible to generate a net result (positive or negative). It is one tool among others that allows investors to learn about the performance of a company, and the tax authorities to know the result achieved by a company.
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Breakdown of the income statement
The income statement is made up of three categories according to the nature of the income and expenses, namely: operating, financial and non-current. The sum of these three results determines the final net result (before tax) which is the key element of the income statement.
The operating result:
This is the result generated directly by the activity of the company. It is calculated on the basis of turnover and other operating income from which operating expenses are subtracted.
Operating income is a good indicator of a company's economic performance.
Operating profit = operating income – operating expenses
The financial result:
The financial result is the difference between financial income and financial expenses. It reflects the company's situation given its choices in terms of financing and financial investments.
Financial result = financial income – financial expenses
The non-current result:
This is the result achieved by the company due to exceptional and non-recurring events. The income generated by the sale of an asset of the company is considered as exceptional income called non-current; in such a way that the payment of tax or criminal penalties and fines is considered a non-current expense.
Non-current income = non-current income – non-current expenses