The Income Statement: How Much Did They Earn?

Revenue tells you how big the business is. Net margin tells you how efficient it is. A $100B company with 5% margin keeps less profit than a $10B company with 30% margin.

Going Deeper — the income statement, the balance sheet, and the cash flow statement all move together. If a company sells $100M of product but customers pay 90 days later, the income statement books $100M of revenue, the balance sheet adds $100M to accounts receivable, and the cash flow statement subtracts $100M from operating cash flow under "changes in working capital" — so operating cash flow is unaffected by the sale until customers pay. If the customer never pays and the receivable is written off eighteen months later, the income statement takes a bad-debt expense for $100M and the balance sheet removes the $100M receivable — but the cash flow statement is untouched, because no cash ever changed hands. Walking three statements through any single transaction is the cleanest test of whether you actually understand them. AI prompt: "Walk me through the three statements when this company books a $20M sale on credit, then writes it off as bad debt eighteen months later."