+ The first line of the IS always shows sales revenue. Comparing sales revenue over multiple years allows you to see your company's development trend. By the way, this is also the first thing that financiers look at.
+ Sometimes, a company earns irregular income, which appears as other operating income on the second line.
+ The primary expense is the cost of goods sold, materials, and services. For example, if you are involved in marketing, this usually includes subcontractor costs and software expenses used for providing services.
+ Other operating expenses consist of daily business costs such as rent, phone calls, insurance, office supplies, business trips, etc. It’s always good to compare operating expenses to sales revenue over several years. Does the ratio stay consistent? Is it too high? Why did it increase at some point? These costs can be managed and adjusted.
+ Following operating expenses are personnel costs. This number shows the total payroll fund for the period under review.
+ If the company has fixed assets, then next comes their depreciation expense for that period.
+ Other business expenses include irregular costs from non-regular activities, such as losses from currency exchange fluctuations, fines, late payments, or losses from selling surplus assets.
+ From the financial income and expenses section, you can see whether the company uses loans or invests itself.
+ If the company has decided to pay dividends, there will be a line called "Income tax" before the final net profit or loss line.
The result is a number indicating how much profit or loss was earned during the period under review. However, it does NOT show how much cash you have! This is often misunderstood—profit does not equal cash balance in your bank account.
**Why is this report still useful if it doesn’t show cash?** – Because it allows you to track what affects your profit and make decisions on how you can influence it yourself.
It’s essential to monitor the structure of the income statement and expense proportions regularly—at least once a year—to understand your company's financial health and performance better.
