An income statement, also known as a profit and loss statement, is a crucial financial document that provides insight into a company’s financial performance over a specific period. Publicly traded companies are required to disclose their income statements regularly, allowing investors and analysts to assess the company’s profitability, operational efficiency, and overall financial health. Here’s a breakdown of how income statements work and how they can be used to evaluate public companies. An income statement typically includes several key components 1. Revenue This is the total amount of money generated from the company’s primary operations, such as the sales of goods or services. 2. Cost of Goods Sold (COGS) This represents the direct costs associated with producing goods or providing services. It includes expenses like raw materials, labor, and manufacturing costs. 3. Gross Profit Calculated by subtracting COGS from revenue, gross profit reflects the profitability of a company’s core operations before considering other expenses. 4. Operating Expenses These are the costs incurred in running the day-to-day operations of the business, including items like salaries, rent, utilities, and marketing expenses. 5. Operating Income Derived by subtracting