Getting Started: The Income Statement

Another consideration is expectations. Analysts and company management make predictions about a company's income in advance to help give investors an idea about the future. These predictions aren't always that accurate (and should be taken with a grain of salt) but how close they are to actual results can have a big effect on a company's stock price. If a company reports a quarterly profit greater than expectations (or even a net loss below expectations), stocks can see some big upward movement.

Like the balance sheet , the income statement is an essential thing to look at in your fundamental analysis of a company. How much money that company's bringing in is a big deal -- and stock prices reflect that. So a company's income statement can have a positive effect on your income as well.

To learn more about fundamental analysis, check out these lessons on TheStreet.com University:

• Getting Started: Fundamental Analysis
• Getting Started: The Balance Sheet
• The Finance Professor: Beginner's Guide to Earnings Calls

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