The income statement is also known as the profit and loss statement or the statement of revenue and expense because it primarily focuses on the company's revenues and expenses during a specific accounting period.
There are four key items on the income statement: revenue, expenses, gains, and losses. There is no distinction either between cash and non-cash receipts (cash sales versus credit sales) or between cash and non-cash payments/disbursements (cash purchases versus credit purchases). After determining the sales, it calculates the net income and, ultimately, the earnings per share (EPS). This is a description of how the company's net revenue is transformed into net income (profit or loss).
A company's income statement serves primarily to convey details about profitability and business activities to stakeholders; however, it provides detailed information about the company's internals for comparison across businesses and sectors. A company's management also prepares similar statements more frequently at departmental and segment levels to gain a deeper understanding of the progress of various operations throughout the year, although such interim reports may remain internal.
Management can make decisions based on income statements such as expanding into new geographies, pushing sales, increasing production capacity, increasing utilization or outright selling assets, or closing a department or product line. Also, competitors may use them to gain insights into a company's success parameters as well as focus areas, such as increasing R&D expenditures.