Income statement (profit and loss statement)

BDC describes an income statement as showing a company’s revenues, expenses and profitability over a period of time. BDC says bankers, investors and others use financial statements to assess the health of a business, and the income statement shows what it earned and spent over the period. The figure at the bottom is net income, the profit left after expenses. The guide on what buyers look for in your financial statements shows how it is read alongside the other statements.

Where it sits with the other statements

BDC lists the income statement and the balance sheet among a company’s financial statements. The income statement covers a stretch of time, while the balance sheet shows what the company owns and owes at the end of that period. Industry reports from Innovation, Science and Economic Development Canada also use income statement items, so a seller’s own statement can be compared with an industry average.

What to check or ask

• Which period each income statement covers, and whether the periods line up from year to year
• Who prepared it, and whether it matches the figures filed in the tax return (see tax returns vs financial statements)
• Which expenses are personal or one-time, and how the seller treats them when stating earnings
• Whether net income is the figure the seller is using when describing the owner’s earnings