The income statement is an accounting statement known as the Statement of Earning or Operations or Profit and Loss or P & L Statement.

If you click on Net Sales below we will open another post that will show more details. There are several links that you can see below, each one of them taking you to another post here.

What we are showing here is the simplified formula for an income statement. As you click on the links below you can see how we could have written in many more lines of detail instead of just the summary.

The Profit Margin ratio is the Net Income / Net Sales. This may also be called Profit Ratio. It indicates how many cents a company generates in profit for each dollar of sale.

Investopedia says: “Gross margin represents how much of a company’s sales revenue it keeps after incurring any direct costs associated with producing its goods and services. This ratio is, therefore, the percentage of sales revenue available for profit or reinvestment after the cost of goods sold (COGS) is deducted.”

Investopedia says: “A company’s operating margin equals operating income divided by net sales. This is used to show how much revenue is left over after paying variable costs such as wages and raw materials. It is the same as the company’s return on sales, and indicates how well that return is being managed.”