An income statement, or statement of operations, reports revenue and expenses over a period and ends in net income. Read it top-down through the subtotals: gross profit shows pricing against direct costs, operating income shows the business before financing, and net income is what is left after interest and tax.
| Note | 2025 | 2024 | |
|---|---|---|---|
| Revenue | 1,240,000 | 1,080,000 | |
| Cost of sales | (744,000) | (659,000) | |
| Gross profit1 | 496,000 | 421,000 | |
| Operating expenses | |||
| Wages and benefits | (210,000) | (188,000) | |
| Rent | (48,000) | (46,000) | |
| Vehicle | (36,000) | (31,000) | |
| Amortization2 | 3 | (42,000) | (38,000) |
| Other | (48,000) | (44,000) | |
| Total operating expenses | (384,000) | (347,000) | |
| Operating income | 112,000 | 74,000 | |
| Interest expense | (14,000) | (11,000) | |
| Income before income taxes | 98,000 | 63,000 | |
| Income taxes | (11,000) | (7,000) | |
| Net income | 87,000 | 56,000 | |
- 1Margin held. Gross margin was 40.0% in 2025 against 39.0% in 2024, so the extra revenue did not come from cutting prices.
- 2Amortization is real but not cash. It spreads the cost of equipment over its life. That is why the cash flow statement adds it back.
Margins worth calculating
| Measure | 2025 | 2024 |
|---|---|---|
| Gross margin (gross profit ÷ revenue) | 40.0% | 39.0% |
| Operating margin (operating income ÷ revenue) | 9.0% | 6.9% |
| Net margin (net income ÷ revenue) | 7.0% | 5.2% |
| Interest coverage (operating income ÷ interest) | 8.0× | 6.7× |
What it does not tell you
Revenue is recognised when it is earned, not when it is paid. A business can report a profit while running short of cash, because its customers have not paid yet or it has bought equipment. That is what the cash flow statement is for.
