A basic overview of income statement items shows how a manufacturing company might present an income statement. Income statements for other companies may appear to be slightly different, but in general the construction would be the same.

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Income Statement Bizzer, Inc.   Sales 125,000 units @$125 each   Less: Cost of Goods Sold $   15,625,000 10,000,000   Gross Profit   Less: Selling, General, Administrative Costs     5,625,000 2,350,000   Operating Income Before Depreciation   Less: Depreciation, Amortization, Depletion     3,275,000 10,500   Operating Profit   Less: Interest Expense     3,264,500 90,000   Nonoperating Income   Less: Nonoperating Expenses     40,000 50,000   Pretax Accounting Income   Less: Income Taxes     3,164,500 1,550,000   Income Before Extraordinary Items   Less: Preferred Stock Dividends     1,614,500 90,000   Income Available for Common Stockholders   Less: Extraordinary Items   Less: Discontinued Operations       1,524,500 20,000 500,000   Adjusted Net Income $ 1,004,500       Earnings Per Share (900,000 shares of stock)       $1.12

An important concept in understanding the income statement is Earnings Per Share (EPS). The EPS for a company is net income divided by the number of shares of common stock outstanding. It represents the bottom line for a company.

Companies continually make decisions on how their bottom line will be impacted since shareholders in the company are concerned with how management decisions affect individual shareholder position.