Lesson 1 of 8
The Income Statement
Revenue, expenses, and the bottom line
Revenue (top line): Total sales. AAPL: ~$391B/year
Cost of goods sold: What it costs to make the products
Gross profit: Revenue - COGS. Shows pricing power.
Operating expenses: R&D, marketing, salaries
Net income (bottom line): What's left after everything. AAPL: ~$94B/year
AAPL revenue
$391B
TTM
AAPL gross margin
~46%
strong pricing power
AAPL net margin
~24%
very profitable
Revenue growing + margins expanding = the stock usually goes up. Revenue shrinking or margins compressing = trouble. Always look at trends over 4+ quarters, not just one.
Net margin across real businesses
NVIDIA
Software-like margins on a hardware product. Rare and enviable.
Microsoft
Cloud + software. Durable, high-quality earnings.
Apple
Healthy for consumer hardware. Services mix keeps rising.
Walmart
Razor-thin by design. Wins on volume, not margin.
Ford
Auto is a capital-hungry, low-margin business. Small missteps wipe out profits.
Above 20% is tech-grade. Below 5% is commodity-grade, any shock can flip you negative.
the shortcut
If you only check one thing, check revenue growth and net margin trend. Growing revenue with stable or rising margins = healthy business.
Check yourself
A company grows revenue 20% but net margin drops from 15% to 5%. What's likely happening?