🧾 Capital Market Chronicles – Episode 111:
SEGMENTS OF FINANCIAL STATEMENTS
🎭 The Income Statement (a.k.a. Profit and Loss… and Occasionally, Pain)
Forget TV dramas — the real action is in a company’s Income Statement. It’s where:
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Revenues make a grand entrance 💃
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Expenses barge in like party crashers 🍕
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And the climax? Either Net Profit 🎉 or Net Loss 😩
This is your front-row seat to see whether a company thrived like a unicorn or just survived like your New Year resolution by March.
💰 Meet the Cast of the Income Statement
🥇 Revenues / Sales – “The Opening Credits”
This is the total moolah 💸 a company earns from its main gig.
Think: selling cupcakes, manufacturing cement, or offering high-tech solutions no one fully understands.
More revenue = applause. Less revenue = awkward cough and “it’s a transitional phase.”
🧾 Cost of Goods Sold (COGS) – “The Price of Making the Magic”
Selling something isn’t free, and COGS is where the bill comes in.
These are the direct costs that go into creating what the company sells — think raw materials, factory labour, packaging, and sometimes even that sneaky glue holding everything together.
If you're a bakery, this is your flour, sugar, eggs… and yes, that secret ingredient Grandma refuses to share.
It’s what the company spends to earn every rupee of revenue.
Subtract COGS from revenue and you get…
🥁 Gross Profit-the ‘almost-there’ money.
💡 Gross Profit – “The Happy Illusion”
Revenue – COGS = Gross Profit.
This is that brief moment when things look great — before rent, salaries, and your Wi-Fi bill enter the chat.
It’s like saying, “Hey! I sold a pizza for ₹300 after spending ₹150 making it!”
Until you realise you forgot to factor in delivery guy Ramesh’s salary.
🧠 Operating Expenses – “The Budget Killers”
These are the everyday running costs — salaries, rent, electricity, internet, software subscriptions you forgot to cancel...
They may not directly make you money, but they sure know how to spend it.
This section tells you: how efficient is the company at adulting?
🧮 Operating Profit (EBIT) – “The Core Truth”
This is the actual result of business operations.
EBIT = Earnings Before Interest and Taxes.
In English? “How much profit are we making just from doing our job, before banks and taxes start looting us?”
If this number is healthy, your business is working. If not…well, you’re surviving on hope and probably investor money 😅.
🎲 Non-Operating Income / Expenses – “The Plot Twists”
Unexpected gains or losses:
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You earned ₹10 lakh in bank interest 💰
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Or lost ₹20 lakh paying a lawsuit for "accidentally" copying your rival's logo 👀
It’s the stuff that doesn’t happen daily but still shakes up the story.
🧾 Net Income – “The Final Verdict”
This is what’s left after all expenses — operating and non-operating — are done from your revenue.
Net Income tells you if the company can strut like Shah Rukh Khan in a climax scene 💃 or should quietly exit stage left.
A positive number = Profit!
A negative number = “We prefer to call it strategic losses…”
⚠️ Wait! One Big Twist You Should Know
Just because a company reports ₹100 crore in net income doesn’t mean it has ₹100 crore in its bank account.
Why? Because income statements deal with accruals — the world of promised money, unpaid bills, and future expectations.
Want to know how much actual cash the business has? You’ll need to sneak in the next episodes: The Cash Flow Statement (Coming soon to a Chronicle near you!).
🧠 What’s the Big Takeaway?
If the Balance Sheet is a photo 📸, the Income Statement is a movie 🎥.
It tells you the story of the company’s performance over time.
Learn to read it well, and you’ll start seeing the difference between profitable companies and those that are just putting on a show for investors.
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