Cracking the Code of the Income Statement
Note the word we used in the title to this chapter: code. Unfortunately, an income statement can often seem like a code that needs to be deciphered.
Here’s the reason. In books like this one—and even later in this book—you will often find cute little sample income statements. They look something like this:
|Cost of goods sold||50|
|Net profit||$ 15|
A bright fourth grader wouldn’t need much help figuring out that one, once she had a little help with definitions. She could even do the math without a calculator. But now check out a real-world income statement, like your own company’s. It’s likely to have dozens of lines, and you may wonder what each ...