Final answer:
A multi-step income statement consists of three sections: Gross Profit, Operating Income, and Net Income. Each section provides insight into different aspects of a company's financial performance, demonstrating profitability and efficiency.
Step-by-step explanation:
The three sections of a multi-step income statement consist of:
- Gross Profit: This section begins with sales revenue, subtracts the cost of goods sold, and results in the gross profit. It highlights the profitability of a company's core business activities.
- Operating Income: This section factors in operating expenses such as selling, general, and administrative expenses (SG&A) from the gross profit to determine the operating income. This helps assess how efficiently a company is running its core operations.
- Net Income: This final section accounts for non-operating items, such as interest, taxes, and one-time transactions, subtracted from operating income to arrive at the net income. This measures the overall profitability of the company after all financial activities.
Each section provides an in-depth look at a company's financial performance, making the multi-step income statement a valuable tool for analysis.