Your income statement, also known as a profit and loss statement, shows your company’s revenue and expenses for a specific period of time.
In this video…
In order to calculate ratios that help you make good business decisions, you need to start with the information in your profit and loss statement (income statement). This video explains what an income statement shows, and why it’s important. You’ll learn about all the valuable pieces of information that an income statement can provide for your construction business.
What Your Income Statement Tells You
The income statement covers a given period of time — a month, a quarter, or a year. The income statement shows your company’s revenue, expenses, and net income for that time period. You can use the profit and loss statement to calculate the all-important gross profit ratio. Learn how to calculate your gross profit margin ratio by watching the ratio video in this series.
Your income statement can also be used to find break-even points. Comparing overhead from one year to another is also done with your profit and loss statement. There is so much useful information that can be found in the income statement.
Your Income Statement Can Help Increase Profits
I know you go straight to the bottom line when reviewing your income statement. And yes, your net income is very important. But don’t ignore the rest of the information on the profit and loss statement — your income statement can also give you lots of other information that can help you run your business. In fact, if you’re looking for ways to become more profitable, the profit and loss statement is the place to start.
The profit and loss statement is so important, we needed two videos to explain it all. In the next video, you’ll learn even more about your income statement.
Next Video: Income Statement Part 2