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Income statements come in two types: single-step and multiple-step. They’re essentially the same thing except that a multiple-step income statement provides more detail, so I focus on the multiple-step version in this chapter. For a rundown of single-step income statements, see the upcoming sidebar.

Many companies prefer to use single-step income statements, particularly for minor reports that aren’t annual or quarterly.

The big difference between the multiple-step income statement and the single-step income statement is that the single-step statement doesn’t separate costs and revenues by their source operations. Instead, it lists all income, breaking it down into net sales and other, and then lists all costs, with a total of the costs. Finally, it lists earnings before interest and taxes (EBIT), taxes, net income, and earnings per share (EPS). It’s a much shorter method of reporting earnings, but it isn’t nearly as informative as the multiple-step statement.