EBITDA

Income Statement

A financial statement that summarizes a company's revenues, costs, and expenses over a specific period, ultimately showing whether the business made a profit or loss. Also known as a profit and loss (P&L) statement, it is one of the three core financial statements used to evaluate a company's performance. The income statement helps business owners and investors understand where money is coming from and where it is being spent.

Profit Margin

A financial metric that measures what percentage of revenue a company keeps as profit after accounting for costs and expenses. There are several types of profit margin, including gross margin, operating margin, and net margin, each measuring profitability at different levels of the business. Higher profit margins generally indicate a more efficient and financially healthy business, though acceptable margins vary significantly by industry.

Depreciation (Business)

An accounting method that allocates the cost of a tangible asset over its useful life, reflecting the gradual wear, tear, and obsolescence of the asset over time. Depreciation is recorded as an expense on the income statement and reduces taxable income, providing a tax benefit even though it does not involve an actual cash outflow. Common assets that are depreciated include equipment, vehicles, buildings, and machinery.

Operating Expenses

The ongoing costs a business incurs through its normal day-to-day operations, not including the direct costs of producing goods or services. Operating expenses include items like rent, salaries, utilities, marketing, insurance, and office supplies. Keeping operating expenses under control is essential for profitability, and the ratio of operating expenses to revenue is a key indicator of a company's operational efficiency.