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%
COGS/Revenue
Name two sections of an income statement.
Revenue and Expenses
Where do you find 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
What is the Purpose of the Income Statement?
To show profitability and performance over a specific time.
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 Operating Expenses?
Salaries + rent+ utilities+
advertising+ insurance + depreciation
Gross profit = $15,000
Operating expenses = $5,000
Calculate the net profit?
$10,000
How do you indicate a negative amount on a financial statement?
in parentheses (100)
Which ratio shows how much profit is made from sales?
Net Profit Margin
What is net profit? How is it calculated?
Gross Profit-Operating expenses-taxes
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
Explain what a net loss is?
When expenses are greater than the revenue
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)? Definition and Meaning
Cost of Goods Sold
Materials purchased to create and sell the product.
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%
How might a company be considered efficient? Think about the Tech Repair vs. the Ice Cream shop
Lower COGS and Expenses.
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