The income statement is one of the three major financial statements that all publicly held firms are required to prepare annually. It provides a record of a company's revenues and expenses for a given period of time, and thus serves as the basic measuring stick of profitability. In fact, the income statement is often referred to as the profit-and-loss statement, with the bottom line literally revealing which result a company achieved. Along with the balance sheet and cash flow statement, the income statement provides important financial information to business managers, investors, lenders, and analysts.

"The income statement is simply a scorecard that summarizes the revenues and expenses of an organization for a specific period of time," Jayson Orr wrote in CMA Management. "It reveals critical information about the operations and profitability of a business unit. It also reveals little secrets that may not be so obvious...