1. Factors affecting a company’s Income statement

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3. What’s in an Income Statement?
Revenue
Less: Cost of Sales
Gross Profit
Less: Expenses
Net Income
What’s in an Income Statement?
Income Statement: Reports a snapshot of a company’s business performance over a period of time. This statement indicates how much revenue (sales) is generated by a business, and also accounts for direct product costs, general expenses, Interest on Debt, Taxes, and other expense items. The purpose of this statement is to show the company’s level of profitability, which is equal to a company’s Revenue net of its expenses.
Replace Almond Joy with Hershey.
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4. Income Statement Format (Sample)
Revenue
Less: Cost of Sales
Gross Profit
Less: Expenses
Net Income
Income Statement Format (Sample)
Revenue Cost of Sales Gross Profit (Revenue less Cost of Sales) Operating Expenses (i.e., Salaries, Rent, Depreciation) Income From Operations (Gross Profit less Expenses) Less: Interest Expense (or Add Interest Income) Net Income Before Tax Income Tax Net Income After Tax
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5. Calculating Net Income and Net Loss
Revenue
Less: Cost of Sales
Gross Profit
Less: Expenses
Net Income
Calculating Net Income and Net Loss
REVENUE less EXPENSES equals…
If REVENUE > EXPENSES, then NET INCOME
If REVENUE < EXPENSES, then NET LOSS
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6. Simple Income Statement
Notes to Instructor:
Extend this activity by distributing a more complete income statement (attached). Ask the students to consider three sections: Revenue, Cost of Goods Sold (the same as Cost of Sales), and Expenses.
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7. Example 2 Notes to Instructor:
Extend this activity by distributing a more complete income statement (attached). Ask the students to consider three sections: Revenue, Cost of Goods Sold (the same as Cost of Sales), and Expenses.
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8. Revenue
Less: Cost of Sales
Gross Profit
Less: Expenses
Net Income
Tying it all together
Natural Resources
Human Resources
Capital Resources
Factors of Production
Complete Income Statement Examples worksheet located under Documents and Examples
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9. Revenue
Less: Cost of Sales
Gross Profit
Less: Expenses
Net Income
Resources
Natural Resources
Human Resources
Capital Resources
Factors of Production
Brown, Betty J., Clow, John E., & Brown, Kenneth W. (1995). Introduction to Business. New York: Glencoe/Mac-Graw Hill.
________ (2007). Beginner’s Guide to Financial Statements. Retrieved from U.S. Securities and Exchange Commission Web site:
Penn, Pace (2010, February 13). The four factors of production. Retrieved from University of North Carolina at Chapel Hill, LEARN NC Web site:
Rubistar. (2000 – 2008). Retrieved from ALTEC of University of Kansas Web site:
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