Create an income
• Introduction to finance &
• By Eric Desmond
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
• 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
• 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
• 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)