The Income Statement

The Income Statement: A Company's Report Card

The income statement (also called the profit and loss statement, or P&L) shows how much money a company earned and spent over a specific period, typically a quarter or a full year. It is the single most important document for understanding whether a company is profitable.

The Three Key Lines

Every income statement follows the same basic structure:

1. Revenue (Turnover) — The total money the company earned from selling its products or services. For Safaricom, this includes M-Pesa fees, airtime sales, and data subscriptions. For Equity Group, it is primarily interest income from loans.
2. Costs and Expenses — Everything the company spent to generate that revenue. This includes operating costs, staff salaries, raw materials, depreciation, and interest on debt.
3. Net Profit (Bottom Line) — What remains after subtracting all costs from revenue. This is the profit that belongs to shareholders.

Reading an NSE Company's Results

When listed companies like KCB Group or EABL publish their results, they typically report:

• Revenue growth — Is the company selling more than last year? Rising revenue is a positive sign.
• Operating profit — Profit from core business operations, before interest and taxes.
• Profit before tax (PBT) — Operating profit minus interest expenses.
• Profit after tax (PAT) — The final net profit after paying corporation tax.

What to Look For

• Consistent revenue growth — Companies like Safaricom have shown steady revenue growth year after year.
• Improving margins — If net profit grows faster than revenue, the company is becoming more efficient.
• One-off items — Watch for unusual gains or write-offs that inflate or deflate profits temporarily.

A company can have high revenue but still lose money if its costs are too high. Always look at the bottom line.