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Chapter 4. Profit

In This Chapter

  • The profit component of step 3 in the financial value process: identify financial imperatives

  • How to read an income statement

  • Why revenue and sales mix are so important

  • The four key profit lines in an income statement

  • Examples of financial value chains connected directly to revenues, expenses, and profit lines

  • Some important profit ratios.


Profit (or loss) is where the analysis of financial performance begins. Examining profit begins your work on step 3 of the financial value process: identify financial imperatives. Accounting terminology is not standardized for the report that depicts an organization’s profit and loss. This report may have such titles as profit and loss statement, statement of operations, income statement, or a similar name. This discussion sticks with the widely recognized term income statement.


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