Income statement components are all elements of a company’s performance that can be measured and reported over a given period of time. These parts provide insight into the financial performance of an organization, helping to track revenue, profits, expenses, and other important factors.
The main components of an income statement include sales, cost of goods sold, gross profit, operating expenses, other non-operating income or expenses, taxes, net earnings, and dividends. Each of these components comprise of smaller subparts which provide more detailed insights on revenue and expenditure affecting a company’s bottom line.
For example, sales may be broken down into sales of products and services; cost of goods sold may be separated into raw materials costs and labour costs; operating expenses may consist of research and development, marketing and advertising, rent and utilities, etc. By examining each part separately and in relation to the others, investors, managers and analysts can take better informed actions and make smarter decisions.