1. Copyright © Texas Education Agency, 2012. All rights reserved. Financial Operating Statement Analysis Statistics & Risk Management 1

2. Copyright © 2012 Texas Education Agency. All rights reserved. “Copyright and Terms of Service Copyright © Texas Education Agency. The materials found on this website are copyrighted © and trademarked ™ as the property of the Texas Education Agency and may not be reproduced without the express written permission of the Texas Education Agency, except under the following conditions: 1)Texas public school districts, charter schools, and Education Service Centers may reproduce and use copies of the Materials and Related Materials for the districts’ and schools’ educational use without obtaining permission from the Texas Education Agency; 2) Residents of the state of Texas may reproduce and use copies of the Materials and Related Materials for individual personal use only without obtaining written permission of the Texas Education Agency; 3) Any portion reproduced must be reproduced in its entirety and remain unedited, unaltered and unchanged in any way; 4) No monetary charge can be made for the reproduced materials or any document containing them; however, a reasonable charge to cover only the cost of reproduction and distribution may be charged. Private entities or persons located in Texas that are not Texas public school districts or Texas charter schools or any entity, whether public or private, educational or non-educational, located outside the state of Texas MUST obtain written approval from the Texas Education Agency and will be required to enter into a license agreement that may involve the payment of a licensing fee or a royalty fee. Call TEA Copyrights with any questions you have.

3. Copyright © Texas Education Agency, 2012. All rights reserved. Sales and Revenues Sales are the funds received from the normal products and services provided by an organization. Sales are the funds received from the normal products and services provided by an organization. – Cash Registers – Bank Deposits 3

4. Copyright © Texas Education Agency, 2012. All rights reserved. Sales and Revenues Additional Revenues result from Interest received, sales of assets, etc. Additional Revenues result from Interest received, sales of assets, etc. – Bank Statements – Contracts Accrual Basis: Recognized when Earned Cash Basis: Recognized when Received 4

5. Copyright © Texas Education Agency, 2012. All rights reserved. Gross Profit Gross Profit is computed by subtracting the direct costs of the sales from the sales Revenue. Gross Profit is computed by subtracting the direct costs of the sales from the sales Revenue. Gross Income = Sales – Cost of Goods Sold 5

6. Copyright © Texas Education Agency, 2012. All rights reserved. Gross Profit Gross Profit is calculated so that management can understand what the sales of products generate in the area of profit. Gross Profit is calculated so that management can understand what the sales of products generate in the area of profit. Inventory plays into this, will cover that later. Inventory plays into this, will cover that later. 6

7. Copyright © Texas Education Agency, 2012. All rights reserved. Expense Summary Compilation of Operating Expenditures Fixed Expenses (Depreciation, Rent….) Fixed Expenses (Depreciation, Rent….) Variable Expenses (Wages, Utilities…) Variable Expenses (Wages, Utilities…) Excludes Purchases for Resale. Excludes Purchases for Resale. 7

8. Copyright © Texas Education Agency, 2012. All rights reserved. Depreciation & Amortized Expense Used when the cash price is not expensed out all at once. Used when the cash price is not expensed out all at once. Buy a business vehicle for $50,000 that will last 10 years. What is the cost per year assuming the vehicle will be junk in 10 years? Buy a business vehicle for $50,000 that will last 10 years. What is the cost per year assuming the vehicle will be junk in 10 years? Buy a years insurance policy for $12,000. What is the expense per month? Buy a years insurance policy for $12,000. What is the expense per month? 8

9. Copyright © Texas Education Agency, 2012. All rights reserved. Net Profit (or Loss) Take the Gross Profit and subtract the Expenditures and you have the Net Profit (or Loss) Take the Gross Profit and subtract the Expenditures and you have the Net Profit (or Loss) 9

10. Copyright © Texas Education Agency, 2012. All rights reserved. Using Ratios Revenue Mix Ratios Revenue Mix Ratios Gross Profit Ratios Gross Profit Ratios Expense Mix Ratios Expense Mix Ratios Expense to Revenue Mix Ratios Expense to Revenue Mix Ratios 10