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A financial statement that shows a company's revenues, expenses, and profits or losses over a specific period of time.
Also called the profit and loss statement (P&L), the income statement starts with revenue (top line) and subtracts costs in order: cost of goods sold (to get gross profit), operating expenses (to get operating income), interest and taxes (to get net income, or bottom line). Key metrics derived from the income statement include gross margin, operating margin, net margin, and earnings per share. Quarter-over-quarter and year-over-year comparisons reveal trends in profitability. Analysts focus on whether a company is growing revenue, expanding margins, or both.