Glossary · Reading the business
Income statement
In short
This financial document summarizes a company's revenues, expenses, and profits or losses over a period, like a quarter or year. It's essential for understanding a business's historical profitability.
What it means in a deal
When evaluating a business, you'll analyze its Income Statements (also called Profit and Loss Statements) for the past three to five years. Look for consistent revenue, manageable expenses, and stable profit margins. This helps you project future cash flow and determine the business's true earning power, especially after considering add-backs for owner compensation.
Related terms
Common questions about Income statement
- What if my personal financial statement shows low liquid assets?
- How important is my personal financial statement for an SBA 7(a) loan application?
- What if the acquired business primarily generates revenue from passive rental income?
- What constitutes "passive income" disqualifying a business from 7(a) loan eligibility?
- When is an SBA Form 912 (Statement of Personal History) required for a non-owner guarantor?
- When is SBA Form 912, Statement of Personal History, specifically required for 7(a) loan applicants?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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