Create an income statement

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Create an income statement Powered By Docstoc
					Create an income
statement
• Introduction to finance &
economics
• By Eric Desmond
Introduction
    There are (4) parts to a set of financial statements:

1) Income statement - tells how much money the company made and how it was spent in a
     given period of time.
2) Balance sheet - Gives a “snapshot” of where the company is financially.
3) Statement of cash flows- Breaks down the cash inflows and outflows into (3) categories
    1)cash flows from operations 2) cash flows from investing 3) cash flows from financing


4) Statement of retained earnings- tells how much cash / equity the company has on hand
Statement of cash flows
• An overview:
•    Sales - $150,000    (1000 units @ $150.00)

•   Cost of Goods sold - $100,000 (1000 units @ $100.00)


•   Gross Income - $50,000 ( 100,000 / 150,000) = 33% Gross profit margin

•   Sales, General & Administrative (SG&A)
•          Salaries $20,000
•          Rent $10,000
•          Utilities $5,000
•          Supplies $ 3,000
•          Net Income (Gross income - SG&A) = $12,000
FYI-

• Cost of goods sold is usually the cost of
  raw material in manufacturing and is a
  very high percentage of sales. It is
  usually lower in service based
  organizations.
• Income statements tell the reader a story
  about the company for a given time. Its
  important to understand what each line
  in the statement means.
Your project -
•   Start putting together estimates on your projects. This will require some
    research.
•   Critical questions:
•   1) what will it cost to produce (1) unit of my good or service?
•   2) How much can I sell (1) unit of my good and service?
•   3) What will be my costs? I.e do I need to rent an office or a warehouse?
•   4) Do I need to borrow money and if so how much? What are the prevailing
    rates to borrow money in my community (call a bank / financial company if
    needed to get this information)

				
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posted:8/9/2012
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