Income Statement: the number that reveals whether the business is really making money
- Mar 24
- 3 min read
We are at an important moment in the business calendar. For many companies in Cabo Verde, this is the period of closing accounts, preparing the balance sheet, drafting the income statement and calculating annual taxes.
For many entrepreneurs, this process is seen as just another administrative requirement — necessary to comply with legal obligations, but distant from the real management of the business.
However, it is precisely here that an essential question arises: is the company really making money?
What the Income Statement actually shows
The Income Statement is the financial report that answers, in a direct way, whether the company generated profit or loss during a given period.
In simple terms, it shows the relationship between:
Revenues (what the company earned);
Costs and expenses (what the company spent).
The result of this difference is what determines whether the business had profit or loss.
But more than just a final number, the Income Statement allows understanding how that result was formed.
Profit does not always mean money in the bank
One of the biggest misunderstandings in business management is confusing accounting profit with available cash.
A company may show profit in the Income Statement and still face difficulties paying suppliers, salaries or taxes.
This happens because the Income Statement follows accounting logic — it records revenues and expenses at the moment they are generated, not necessarily when the money enters or leaves the bank account.
In practice, this means that a company can:
sell a lot,
register profit,
and still have no liquidity.
This difference is what explains why many businesses “earn on paper” but struggle in daily cash management.
The structure of the result
To better understand the performance of the business, the Income Statement is usually organised in stages.
Among the most important are:
Operating result: reflects the performance of the core activity of the company;
Financial result: includes costs with loans or financial income;
Net result: the final profit after all costs, expenses and taxes.
This breakdown allows identifying where the company is actually generating or losing value.
Why many entrepreneurs do not use this report
Despite its importance, the Income Statement is often underused in management.
The reasons are similar to other financial reports:
technical language that is not very accessible;
lack of financial literacy;
the idea that it is a document only for accounting or tax purposes;
focus on the bank balance instead of structured information.
As a result, many decisions continue to be made based on perception, not on real data.
Three essential questions for reading the Income Statement
It is not necessary to master all accounting concepts to start using this report.
Three simple questions already provide a clearer view of the business:
1. Is the company generating consistent profit?Not just in one month, but over time.
2. Are costs growing faster than revenues?This may indicate loss of efficiency or pressure on margins.
3. Where is the result being lost or gained?In operations, in financial costs, or in other areas of the business.
These questions help transform the Income Statement into a practical management tool.
From number to decision
When used regularly, the Income Statement stops being just a report and becomes a support for decision-making.
It allows, for example:
adjusting prices;
controlling costs;
evaluating profitability by product or service;
deciding whether to invest, reduce expenses or rethink the strategy.
More than knowing if there is profit, the objective is to understand why it exists — or why it does not.
Conclusion
The Income Statement is not just an accounting document. It is one of the clearest indicators of the economic performance of the company.
Ignoring this report is managing without knowing whether the business is truly creating value.
In the end, the message is simple: it is not enough to sell — it is necessary to generate profit in a consistent and sustainable way.
And that answer is, always, in the numbers.
This topic was discussed in detail in the latest episode of the “Economia Descomplicada” podcast.
Listen to the full episode here:
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