Skip to main content
FLC
Start Learning
Back to the lesson plan

Prints on letter paper. Turn off headers and footers in your print settings for the cleanest copy.

Financial Literacy Club

learnwithflc.org

NameDatePeriod

Understanding Businesses · Lesson 3

Reading an Income Statement

Part A. Guided notes

Fill in each blank using the word bank.

Word bank: filings · operating · performance · periods

  1. Income statement = over a period.
  2. Revenue → gross profit → income → net income.
  3. Compare : growth and margin trends matter most.
  4. Real are free on the SEC's EDGAR site.

Part B. Check your understanding

Circle the best answer.

  1. 1. What time frame does an income statement cover?

    • A. A single moment, like December 31
    • B. The company's entire history
    • C. A period of time, like a quarter or a year
    • D. Only the next year

  2. A company's revenue grew 5% this year, but its net income fell 20%.

    2. What's the most reasonable first question?

    • A. Which costs grew faster than revenue?
    • B. How many employees wear uniforms?
    • C. Is the logo changing?
    • D. Nothing to investigate — revenue grew.

  3. Operating income is $400,000. Interest is $50,000. Taxes are $70,000.

    3. What is net income?

    • A. $400,000
    • B. $280,000
    • C. $350,000
    • D. $520,000

Part C. Apply it

Show your work.

  1. 1. Revenue grew from $400,000 to $500,000. What was the growth rate?

  2. 2. Gross profit is $150,000 on $500,000 of revenue. What's the gross margin?

Part D. Think about it

Answer in complete sentences.

  1. 1. Pick a public company you know. What would you want to learn from its income statement?

  2. 2. Why might a company's profit grow faster than its revenue?

Exit ticket

Name

An income statement shows performance over a ___. A balance sheet shows a ___.