115 CFA
File: Financial Analysis - Reading 21 - 1. Components and Format of the Income Statement

1. Components and Format of the Income Statement

a. describe the components of the income statement and alternative presentation formats of that statement;

What are the nine common components of the Income Statement?
1. Sales or revenue
2. Cost of Goods Sold (COGS)
3. Gross margin
4. Operating expenses
5. Income from operations (operating income)
6. Other revenues and expenses
7. Income before income taxes
8. Income taxes
9. Net income

What is net sales?
Net sales = gross sales - sales returns and allowances - discounts.

What is gross margin?
Gross margin = net sales - costs of goods sold.

What is another name for gross margin?
Also called gross profit.

Operating expenses are all expenses except what?
Operating expenses are expenses other than the cost of goods sold

What is income from operations?
Income from operations is the difference between gross margin and operating expenses.

What is another name for income from operations?
Also called operating income

How is net income calculated?
Net income is what remains of the gross margin after operating expenses are deducted, other revenues and expenses are added or deducted, and income taxes are deducted. It is the final figure, or "bottom line," of the income statement.

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