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Financial Statements

The Income Statement reveals a business's revenues and expenses over a specified period, indicating profit or loss. It allows you to track changes in sales, expenses, and income, and to forecast future performance. With it, you can analyze costs, identify where to cut back, and decide on adjustments in expenditures. Key components include Revenue, Cost of Goods Sold (COGS), Gross Profit, Operating Expenses, Net Income Before Taxes, Taxes, and Net Income/Loss After Taxes. Engage in an activity to prepare an income statement for practical understanding.

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Financial Statements

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  1. Financial Statements Income Statement

  2. Income Statement Show the business’s revenues and expenses incurred over a period of time and the resulting profit or loss

  3. Can help you: • Examine how sales, expenses, and income are changing over time • Forecast how ell your business can expect to perform in the future • Analyze your costs to determine where you may need to cut back • Identify categories of expenditures you may want to increase or decrease

  4. Consists of these parts: • Revenue • The dollar value of the goods or services a business sells to customers • Cost of Goods Sold (COGS) • The cost of inventory a business sells • Gross Profit • Difference between revenue and COGS • Operating Expenses • Expenses necessary to operate a business • Net Income Before Taxes • Income before taxes remaining after COGS and operating costs are subtracted • Taxes • Net Income/Loss After Taxes

  5. Income Statement Activity In pairs you are going to prepare an income statement with the given cards

  6. Income Statement Activity • Using excel prepare an estimated income statement for your own company • Estimate your revenue & COGS • Use your monthly fixed costs to serve as your operating expenses • You will need to X’s 12 months • Use a 40% tax rate • When done print out and turn into the bin

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