Explain information that can be obtained from financial statements

Explain the purposes of financial statements

Explain the purposes of financial statements

Financial Statements

The income Statement Specifies the financial results of a business over a defined period of time States whether a business is making a profit or not Also known as a profit and loss statement or P and L Statement Revenue – Expenses = Profit or Loss

The Income Statement Revenue ( Sales ) – The money generated by the company by selling its products or services to customers. Expenses Cost of Good Sold – Companies that sell items ( Service companies do not have this expense) Represents all expenses directly related to making and storing a company’s goods including raw materials, warehousing and direct labor cost Operating Expenses – include all cost incurred in operating the business that are not directly related to the production and storage of a company’s good include administrative salaries, research and development, and marketing cost

Operating Expenses

Operating Expense

Operating Expense If Volume pizza stops paying for raw materials to produce pizza or stops paying rent on the pizzeria if can’t produce it’s product. This reflects cost of Goods Sold. If Volume pizza stops paying office rent they will get evicted from their administrative office, however they will still be able to produce their product. This reflects operating expenses.

Accrual Accounting System

Accrual Accounting System cont. Reports cash revenue and unpaid invoices Reports expenses, however could reflect unpaid expenses that have not been paid

Earning Before Interest and Taxes

The Income Statement Interest Expense Income Tax

Performance Activity. Research the Companies you invested in on the Market Watch Game. Team members need go on a scavenger hunt for financial information about the companies. Team member are to gather Revenue, Cost of Goods Sold, Gross Profit, Operating Expense, Depreciation, and EBIT for the most recent years. Please include the links where the information was obtained.