Understanding and Analyzing an Income Statement
Source: Council for Economic Education (EconEdLink) | Type: Lesson
The income statement is one of the most important financial statements used in making business decisions. The income statement is an analytical tool that can be used in business and personal finance that summarizes business and personal transactions for a time period. Students must learn the components of an income statement and the ratios used to analyze a company's operations for a fiscal time period. This lesson will provide the tools for construction of an income statement for a service business and a merchandising business. In addition, students will be able to calculate the component percentage that each revenue, expense, and net profit. One of the main goals of this rigorous examination of the income statement is to prepare students for an accounting or personal finance class.
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