Jack Stack, in his thought-provoking book The Great Game of Business, says: "The financial system shows you where you can make more money just by telling you where you're losing it." Although deceptively simple, the message in this statement is exceedingly powerful. Think about it. You can make more money just by knowing where you're losing it. But in order to know where and why you're losing money, you've got to turn to the financial system. For our purposes, the financial system means the Income Statement.

The Income Statement is the alpha and omega of business-the beginning and the end. It will warn you of impending danger and alert you to hidden opportunities. This financial statement, more than any other, reflects the impact of your decisions on the raison d'être of business-profitability. Therefore, it only makes sense to focus your attention on this all-important barometer of financial health. Granted, the Balance Sheet and Statement of Changes in Financial Position are important. But understanding the Income Statement cuts to the heart of business like nothing else. You should get to know your Income Statement-intimately. If you do, I promise you'll be handsomely rewarded.

The Income Statement is also known as the Profit & Loss Statement, Income & Expense Statement, or Operating Statement. Different names for the same fundamental equation: Sales minus Expenses = Profit or Loss. Remember these two words well-profit and loss-because they are two of the most important words you'll likely ever hear in business. Your future, your business unit's future, and the future of your organization hinge on these two words. Here's why: no profit= no cash= no dividends= no shareholders or lenders= no company= no job. Profit is the driving force behind everything everyone does, every waking moment in business. The Income Statement is simply a scorecard that summarizes the Revenues and Expenses of an organization for a specific period of time. It reveals critical information about the operations and profitability of a business unit. It also reveals little secrets that may not be so obvious. In short, the Income Statement tells you how successfully a business unit is fulfilling its prime directive-to generate profit.