You might want to invest in a company for many reasons. Perhaps it's a leader in the industry. Or its CEO has a great record of turning companies around. Or its products are on the cutting edge of technology.
But if the company is not turning a profit, or doesn't show strong potential to become profitable over the medium term, you probably wouldn't want to invest in it.
The income statement tells you if the company is making a profit—that is, whether it has positive or negative net income. (This is why the income statement is also called a profit-and-loss statement.) It shows a company's profitability throughout the year—typically, by presenting monthly, quarterly, and year-to-date summaries of the company's operations. In addition, the income statement tells you how much money the company spends to make that profit—that is, what its profit margins are.
But if the company is not turning a profit, or doesn't show strong potential to become profitable over the medium term, you probably wouldn't want to invest in it.
The income statement tells you if the company is making a profit—that is, whether it has positive or negative net income. (This is why the income statement is also called a profit-and-loss statement.) It shows a company's profitability throughout the year—typically, by presenting monthly, quarterly, and year-to-date summaries of the company's operations. In addition, the income statement tells you how much money the company spends to make that profit—that is, what its profit margins are.
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