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Reading Financial Statements - Terminology

Revenues

Profits

[1] Cost of Goods Sold (COGS) includes machinery costs, direct labor costs, raw material costs [2] Cost of Goods Sold (COGS) does not include money paid to sales department, advertising etc. That goes into Operating Expenses

EBIT

Earnings Before Interest and Taxes (EBIT) = operating profit + non-operating revenue[3]

[3] Non-operating revenue includes income from non-core business activities such as income from investing company’s cash, income gained by selling a division etc.

Take-aways

Corrections

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Additional Reading

  1. Investopedia - What’s the difference between gross profit and operating profit?