Skip to content 
An income statement shows how much revenue a company earned over a period, the costs it incurred and the profit left for shareholders. To read one as an investor, follow it from top to bottom, calculate the key margins, compare several periods and check for one-off items that make profit look better or worse than the underlying business.
This guide walks through each line of a typical income statement, as found in the quarterly and annual reports of Bursa Malaysia listed companies.
Key takeaways
- Revenue is the top line; net profit attributable to owners is the bottom line.
- Gross, operating and net margins show how much of each ringgit of sales becomes profit.
- Trends over several periods matter more than a single quarter.
- One-off gains and losses can distort reported profit.
- Earnings per share (EPS) links profit to the share price through the P/E ratio.
What the income statement tells you
The income statement, also called the statement of profit or loss, covers a period of time, such as a quarter or a financial year. It answers a simple question: did the business make money, and how? It sits alongside the balance sheet and cash flow statement, which together give the full picture.
The main lines, from top to bottom
| Line | What it means |
|---|---|
| Revenue | Money earned from selling goods or services |
| Cost of sales | Direct costs of producing what was sold |
| Gross profit | Revenue minus cost of sales |
| Operating expenses | Selling, administrative and other running costs |
| Operating profit | Profit from core operations before finance costs and tax |
| Finance costs | Interest on borrowings |
| Profit before tax | Profit after finance costs, before tax |
| Tax expense | Income tax charged for the period |
| Net profit | Profit after tax |
| Profit attributable to owners | The share of net profit belonging to the company’s shareholders, after non-controlling interests |
Margins: profit per ringgit of sales
Margins turn raw profit into percentages so you can compare periods and companies of different sizes.
- Gross margin = gross profit ÷ revenue. Shows pricing power and production efficiency.
- Operating margin = operating profit ÷ revenue. Shows how well the business controls running costs.
- Net margin = net profit ÷ revenue. Shows what is left after all costs, interest and tax.
Rising margins over several years can suggest a competitive advantage. Falling margins deserve investigation. Our article on economic moats explains why.
Read the trend, not just the number
A single quarter can be affected by seasonality, timing of contracts or one-off events. Compare the current quarter with the same quarter last year, and look at full-year results over three to five years. Malaysian listed companies report the current quarter alongside the comparative quarter of the previous year, which makes this easier.
Watch for one-off items
Profit can be boosted by gains on disposal of assets or fair value gains, or reduced by impairments and restructuring costs. These items may not repeat. Read the notes and the management commentary to identify them, and consider what profit looks like without them. This is often called core or underlying profit.
Earnings per share
Earnings per share (EPS) is profit attributable to owners divided by the number of shares. It is the figure used in the price-to-earnings ratio. Our guide to the P/E ratio explains how to use EPS to judge valuation. Watch for share issues that increase the number of shares, which can dilute EPS even when total profit rises.
Warning signs on the income statement
- Revenue growing but profit falling for several periods.
- Margins shrinking while competitors’ margins hold steady.
- Finance costs rising faster than operating profit.
- Profit relying on other income rather than core operations.
- Frequent “one-off” items that appear every year.
None of these proves a problem on its own, but each is a reason to read further. Always compare profit with cash flow from operations, because profit can be recorded before cash is received.
A quick worked example
Suppose a company reports revenue of RM100 million, cost of sales of RM60 million and operating expenses of RM25 million. Gross profit is RM40 million (a 40% gross margin) and operating profit is RM15 million (a 15% operating margin). If finance costs are RM3 million and tax is RM3 million, net profit is RM9 million, a 9% net margin. Comparing these margins with last year and with peers tells you far more than the RM9 million figure alone.
Putting it into practice
Pick one Bursa Malaysia company you know, download its latest annual report and work through the income statement line by line using this guide. Then read our guide to fundamental analysis for beginners to see how the income statement fits with the balance sheet and cash flow statement.
Our Financial Analysis & Investment Fundamentals with AI course with Chartered Accountant Stanley Ng works through real financial statements in detail, and Session 1 is free.
Frequently asked questions
What is the difference between gross profit and net profit?
Gross profit is revenue minus direct costs of sales. Net profit is what remains after all expenses, finance costs and tax.
Where can I find a company’s income statement?
In its quarterly reports and annual report, published through Bursa Malaysia and on the company’s investor relations website.
What is a good profit margin?
It depends on the industry. Compare margins with the company’s history and with direct competitors.
Why can profit and cash flow differ?
Profit is recorded when earned, which may be before cash is received. The cash flow statement shows actual cash movements.
What is profit attributable to owners?
The portion of net profit that belongs to the company’s shareholders, after deducting the share owned by minority shareholders of subsidiaries.
Want structured guidance? Albertstein Consultancy runs stock market and investment courses in Malaysia, live on Zoom and in person in Kuala Lumpur. See our investment courses and upcoming sessions or contact us.
This article is for educational purposes only and is not investment, tax or legal advice. Consider your own circumstances and seek licensed professional advice before making financial decisions.