An income statement shows a company's revenue, expenses, and profits over a specific period of time.

Its main purpose is to illustrate how profitable a company has been 📊

Think about your personal finances 📙

Every month, you’ll have money coming in, money going out, and if you calculate the difference between those, that’s how much you “profit”

Income statements contain pretty much the same 3 numbers as what you’d look for when analyzing your own financial situation ➡️

1️⃣ Revenue = the total money a company receives from selling its product or service, like Nike's total sales of shoes + apparel

This is also known as the “top line” 🏷️

2️⃣ Expenses = anything a company spends money on, from employee wages, to manufacturing costs, investments in other companies and more. 💸

3️⃣ Net Income = revenue - expenses

This is how much money the company actually “earned” in a period of time, and is also known as the “bottom line” 🌟

These 3 numbers can give you a pretty clear picture of almost any company’s financial story. 👟

Understanding the relationship between these numbers over time is key to picking good investments.

For example, if you see negative net income on an income statement, that means the company is losing money! 📉

And if you notice a company consistently loses money – especially if they seem to lose more and more each quarter – it may be a riskier investment.

Meanwhile, if you find a company with a positive net income that has increased each quarter, that could be a good investment because growing profits generally means bigger dividends and a growing share price! 📈