Module I· Three-Statement Mechanics & LinkagesBasic
Question
What is the income statement for?
Answer
What
Shows economic performance over a period (quarter / fiscal year).
Accrual principle
Revenue when earned (not when cash arrives), expenses when economically incurred.
Standard cascade
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Revenue
→ Gross profit (after COGS)
→ EBITDA (after personnel/other)
→ EBIT (after D&A)
→ EBT (after interest)
→ Net income (after taxes)
```
Important
The income statement is not the same as cash flow. A company can be profitable and still die of illiquidity (typical for growth companies with high working-capital needs).