Income Statement Basics
What is an income statement?
This financial statement shows revenues and expenses for a period.
What is revenue?
Money earned from selling goods or services.
Revenue = $10,000
Expenses = $7,000
➡️ What is the $3,000 called?
Net Profit
Revenue = $40,000
Cost of Goods Sold = $25,000
Calculate the COGS Ratio.
63%
Name two sections of an income statement.
Revenue and Expenses
What is revenue (or sales)?
The top line of the income statement.
Give two examples of expenses.
Rent, Utilities, Salaries, Insurance
Revenue = $20,000
COGS = $8,000
Calculate the Gross Profit?
$12,000
Revenue = $50,000
Net Profit = $8,000
Calculate the net profit margin.
8000/50000*100=16%
Why is the income statement important?
It shows the company's profitability.
What is gross profit?
Revenue minus cost of goods sold.
What is the formula for net profit?
Revenue - Expense
Gross Profit - Expenses
Gross profit = $15,000
Operating expenses = $5,000
Calculate the net profit?
$10,000
Revenue = $40,000
Expense = $15,000
Calculate the expense ratio.
15,000/40,000*100= 38%
Which ratio shows how much profit is made from sales?
Net Profit Margin
What is net profit?
The final answer on an income statement.
What is a net loss?
If expenses are greater than revenue, a business has this.
COGS = $12,000
Revenue = $40,000
Calculate the gross profit?
$28,000
Revenue = $50,000
Cost of Goods Sold = $30,000
Operating Expenses = $12,000
Calculate the net profit and net profit margin.
Gross Profit= $20,000
Net Profit=$8,000
Net profit margin= 8000/50000*100= 16%
Explain the difference between gross profit and net income.
Gross profit is revenue minus COGS, while net income or profit is gross profit minus all expenses.
What is (COGS)?
Cost of Goods Sold
Rent - $500
Utilities - $300
Salaries- $1,400
What are the total expenses?
$2,200
COGS = $12,000
Revenue = $40,000
Calculate the COGS Ratio.
12,000/40,000*100=30%
Revenue = $80,000
Cost of Goods Sold = $55,000
Calculate the gross profit and gross profit margin.
Gross Profit= $80,000 - $55,000= $25,000
Gross Profit Margin= $25,000/$80,000*100= 31%
What is net profit, and how to calculate it?
Net Profit is the money a business has left over after subtracting all expenses.
Revenue - Expenses