Group 13: Seema Etwaru,Michael Luu,Bagdad Muslet and Rachael Terry Income Statements Group 13: Seema Etwaru,Michael Luu,Bagdad Muslet and Rachael Terry

Objectives Importance of Income Statements Defining Income Statements Components of an Income Statement Expenses Gains Revenues Losses

Why are income statements important? Profitability Gross Profit Operating Expenses Net earnings Income statements are important because they show the profitability of a company during a specific time period usually a month, or year. The gross profit consists of the revenues, so the sales of goods minus the cost of goods. The operating expenses shows the cost of your business, apart from what you're spending on your products. Net earnings are the bottom line as it shows how much profit or loss you achieved. These statements are used primarily by analysts, investors, stockholders, potential investors, or lenders in order to analyze the financial situation of a company.

What is an income statement? Measures a company’s financial performance over a period of time “profit and loss statement” Summary of: Business transactions over a period of time Earned revenue and expenses Net profit and loss Useful tool for: Accountants and business owners An income statement is a financial statement that measures a company’s financial performance over a period of time. Also known as profit or loss statement. This statement reflects the results of all business transactions over a period of time and is a summary of all the firm’s earned revenue. It is a useful for accountants and business owners to keep track of the company’s profitability in a timely manner in order to institute corrective actions when necessary It is a summary of all earned revenue and expenses, results of all business transactions over a period of time and net profit and loss, which will be further discussed in the coming slides. An income statement only shows gains, losses, revenue and expenses. It doesn't show individual transactions in or out. Income statements are usually completed monthly; this helps gage whether the pharmacy is making money. If it isn’t making money the income statement can be a tool to help analyze where adjustments can be made for the next month.

What should my income statement include? Revenue-Money earned from daily operations Money the company is actually receiving AKA “Top-line” Revenue=(Price per unit)(# of units sold) Operating revenue vs. non-operating revenue. Revenue is money earned. AKA “top-line” because it is found first on the income statement. Operating revenue is money that is earned from the company's daily activities. In a pharmacy the operating revenue is the money made from filling prescriptions. Non- operating revenue is money earned from secondary activities. they are hard to predict and change from income statement to income statement.This would be the sale of an asset or money awarded from a lawsuit. Expenses are deducted from revenue to produce the company’s net income, this leads us into expenses.

What should my income statement include? Expenses-Normal costs incurred during daily operations Fixed or variable Expenses are costs incurred from daily operation. For example the electric bill, which is required to remain open, is a required expense. Wages and salaries are common expenses for daily operations; without paying them your pharmacy would not be able to operate. Expenses are a factor that influence and are good indicators of the company’s viability. Expenses can be fixed or variable month to month. Fixed expenses are rent and insurances while variable expenses are things like electricity, or cost spent on inventory.

What should my income statement include? Gains-Profit gain from the sale of an asset Gain = Sale Price - Cost Price Sale Price > Cost Price Gain is profit from the sale of an asset.On an income statement, when total revenue exceeds total expenses over the period of time, remaining positive amount is net income or profit For example you sell your computer system to another retail pharmacy chain for more money than it is actually worth. The increased difference is a financial gain.

What should my income statement include? Losses-net loss from the sale of an asset Loss = Cost Price - Sale Price Cost Price > Sale Price A loss is a decrease in the amount of money received from a sale of a long term asset. When total expenses exceeds revenue, this results in a net loss. for example the same computer system you sold before was actually sold for less than it was worth; this is reported as a loss.

Thank you! What questions do you have?

References: Peterson A, Kelly W. Management in Pharmacy Practice Second Ed. Boca Raton, FL: CRC Press. 2014. Introduction to Income Statements.Accounting Coach website. Updated 2015 Available from: http://www.accountingcoach.com/income- statement/explanation. Accessed on November 25, 2015. Financial Statements. Investopedia website. Updated 2015. Available from: http://www.accountingcoach.com/income-statement/explanation. Accessed on November 27,2015