1. Factors that Makeup an Income Statement Analyzing Revenues, Costs, & Expenses

2. What is an Income Statement? A summary of a business’s income & expenses during a specific period and shows their profit or loss.

3. Factors that are addressed in an Income Statement  Revenue  Cost of Goods  Gross Margin  Operating Expenses  Taxes  Net Profit(Income) or Loss

4. Revenue  Any money that is generated and flows into a business.  Most money in a business is generated through sales revenue

5. Cost of Goods Sold(COGS) The amount it costs to produce or purchase goods that are sold.

6. Gross Margin(Profit) The difference between sales revenue & cost of goods sold. Profit before operating expenses are taken out. Gross Sales – COGS = Gross Profit

7. Operating Expenses Any money paid by a company to operate and maintain the business. Dollars that flow out of a business

8. Two Types of Operating Expenses  Variable – Change from month to month (Ex.-Utilities)  Fixed – Same from month to month (Ex.- Rent)

9. Taxes The amount paid to the government

10. Basic Business Formula Revenue – Costs & Expenses = Net Profit or Loss

11. Break-even Point  Revenue = Costs & Expenses  There is no Profit or Loss

12. Purpose of an Income Statement The ultimate purpose is to see if revenues outweigh expenses to determine if a business makes a profit or loss over a period of time.