Follow the money

Where Example Co.'s $2B of sales comes from, and where every dollar goes before $0.25B is left as profit.

Read left to right. Blue bands are money still flowing towards profit; orange bands are costs leaving the business. The thicker the band, the more money.

WHERE SALES COME FROM Hardware $0.8B · 40% Software $0.4B · 20% Subscriptions $0.3B · 15% Services & support $0.2B · 10% Advertising $0.15B · 7.5% Licensing $0.1B · 5% Other $0.05B · 2.5% Revenue $2B Gross profit $0.8B · 40% Cost of goods sold −$1.2B Operating income $0.4B · 20% Operating expenses −$0.4B Materials −$0.7B Factory labour −$0.3B Shipping in −$0.2B Net income $0.25B · 12.5% Interest −$0.05B Income taxes −$0.1B Selling, general & admin −$0.2B Research & development −$0.1B Depreciation & amortization −$0.1B
Where sales come from Money left (profit so far) Costs What the costs are made of
Terms in this picture: Revenue COGS Gross profit Gross margin Operating expenses Operating income Operating margin Depreciation & amortization Net income Profit margin