The Penny Stock Income Statement
An income statement illustrates how much money a penny stock company has generated by selling its product or service. It also shows all the costs incurred to make those sales happen. By considering revenues from sales over the period and then subtracting expenses, the income statement displays whether the underlying company is operating at a profit or a loss.
The income statement is generally divided into the following five main parts:
Sales (also called revenues): This shows the total amount of money the company brought in by selling products and services. This is usually displayed on the first line of the statement.
Cost of sales (also called cost of goods sold): To fulfill the sales or produce the wares to be sold, a company incurs costs. These costs are detailed on the lines immediately below the revenue value; they’re subtracted from the total sales figure.
Gross profit: This part shows how much profit is left after the costs of sales are subtracted from the total revenue. If a company spends $75 to produce a product and then sells $100 worth of product, it has a $25 gross profit.
Operating expenses (also called overhead): These are the numerous other expenses a company pays besides those associated with cost of sales. Operating expenses may include utility bills, rent, advertising, research and development, and so on. These operating expenses are subtracted from gross profit to give you the net profit number.
Net profit: After subtracting all costs to produce and sell the product and all expenses to run every facet of the business, a company is left with its net profit number.
By reviewing the income statement, you can understand many important aspects of a company. For example, you will know how much money was generated, the costs incurred to create that revenue, and whether or not it made a profit.