The Finance Professor
The Finance Professor: How to Read an Income Statement
05/21/07 - 04:04 PM EDT
Provision for Income Taxes Under GAAP, a company must make a calculation or provision of the amount of income taxes owed based upon the company's GAAP results. This amount may differ from the actual taxes paid to federal and local governments. For the purposes of the income statement, the provision is presented. In terms of cash flow and balance sheet statements, taxes owed or paid are factored in relative to the provision. (The cash flow and balance sheet statements will be covered in the upcoming weeks.) The Bottom Lines: Net Income and EPS When we subtract taxes from EBIT we arrive at net income. If we divide net income by the total diluted outstanding share count of the company, we get
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