The primary objective of the income statement is to report to investors how much money a business made or lost during a specific period of time. Years ago, it was referred to as the Profit and Loss (or P&L) statement, and has since evolved into the most well-known and widely used financial report on Wall Street. Many times, investors make decisions based entirely on the P&L report without consulting the balance sheet or cash flow statements (which, while a mistake, is a testament to how influential it is). To an enterprising investor, the income statement reveals much more than a business’ earnings. It can give important insights into how effectively management is controlling costs, how much is being spent on research and development, the total amount of taxes paid, and interest coverage. In a few short minutes, an investor or analyst can also calculate profit and operating margins to compare a company to its competitors. As we progress through this series of investing lessons, you must remember John Burr William’s basic truth that a business is only worth the profit that it will generate for its owners from now until doomsday, discounted back to the present, adjusted for inflation. The income statement is the “report card” of those earnings, which ultimately determine the price you should be willing to pay for a business. Sit back in your chair, take out a copy of an annual report, and let’s begin working through it. In the end, I think you’ll be surprised by how much you’ve learned. As always, there will be quiz following the lesson; you should be able to pass without missing more than two