What is an income statement?

The income statement is one of the three financial statements investors must understand to analyze businesses.

The purpose of the income statement is to show whether a company is profitable by showing its operating results over a period of time.

You can think of the income statement as your household budget.

If you were to look at your monthly budget, you would start by showing how much money you make from your job or other sources. Then, you'd subtract the expenses that you accrue during the month. The result? Your savings rate. With a company, the income statement follows a similar model.

Notably, the income statement uses accrual accounting. This means revenue & expenses are recorded when a transaction occurs, regardless of whether a payment has been made.

Income statement synonyms

Unfortunately, income statements do not have a universal look or layout.

On top of that, management teams will often use interchangeable words and terms when creating their income statements or discussing them with investors.

That's because executives have complete autonomy over the terms and layouts of their financial statements.

These factors can understandably confuse investors. For instance, you might hear a CEO talk about increasing overhead costs in the conference call, but when you look at the income statement, you cannot find any mention of overhead.

To help dispel some of this confusion, here are other words that management teams can use when creating their Income Statement:

INCOME STATEMENT SYNONYMS:

→Revenue Statement

→Earnings Statement

→Operating Statement

→Statement of Earnings

→Statement of Operations

→Profit and Loss Statement (P&L)

REVENUE SYNONYMS:

→Sales

→Top Line

→Receipts

→Turnover

→Gross Sales

→Gross Income

COST OF GOODS SOLD SYNONYMS:

→Goods Cost

→Direct Costs

→Cost of Sales

→Cost of Revenue

→Cost of Products Sold

GROSS PROFIT SYNONYMS:

→Sales Profit

→Gross Margin

→Gross Income

→Gross Earnings

OPERATING EXPENSES SYNONYMS:

→Overhead

→Operating Costs

→Operating Outgo

→Sales & Marketing

→Business Expenses

→Operational Expenses

→General & Administrative

→Research & Development

→Selling, General, and Administrative Expenses (SG&A)

OPERATING INCOME SYNONYMS:

→Operating Profit

→Business Income

→Operating Margin

→Operating Earnings

→Operating Cash Flow

→Earnings Before Interest and Taxes (EBIT)

PRE-TAX PROFIT SYNONYMS:

→Pretax Profit

→Pretax Earnings

→Income Before Tax

→Profit Before Tax (PBT)

→Earnings Before Tax (EBT)

→Operating Profit Before Tax

→Earnings Before Income Taxes (EBIT)

INCOME TAX SYNONYMS:

→Direct Tax

→Revenue Tax

→Earnings Tax

→Tax on Income

→Corporate Income Tax

→Fiscal Charge on Income

EARNINGS SYNONYMS:

→Profits

→Income

→Earnings

→Net Profit

→Bottom Line

→Net Earnings

→Profit After Tax (PAT)

→Net Income After Taxes

→Earnings After Tax (EAT)

→Net Income Before Extraordinary Items

SHARES OUTSTANDING SYNONYMS:

→Issued Shares

→Outstanding Stock

→Outstanding Equity

→Basic Shares Outstanding

→Diluted Shares Outstanding

→Outstanding Shares of Stock

→Fully Diluted Shares Outstanding

EARNINGS PER SHARE SYNONYMS:

→EPS

→Profit Per Share

→Net Income Per Share

Key Takeaway

The income statement is essential for understanding a company's profitability and financial health. Familiarizing oneself with the various terms and synonyms associated with the income statement helps investors decode the terminology often used by management.

This knowledge enables investors to make clearer, more informed evaluations of a company’s financial performance. By mastering these terms, investors can better interpret income statements, regardless of the specific language or layout used.