1. Create an income statement Introduction to finance & economics By Eric Desmond

2. Introduction There are (4) parts to a set of financial statements: 1) Income statement - tells how much money the company made and how it was spent in a given period of time. 2) Balance sheet - Gives a “snapshot” of where the company is financially. 3) Statement of cash flows- Breaks down the cash inflows and outflows into (3) categories 1)cash flows from operations 2) cash flows from investing 3) cash flows from financing 4) Statement of retained earnings- tells how much cash / equity the company has on hand

3. Statement of cash flows An overview: An overview: Sales - $150,000 (1000 units @ $150.00) Sales - $150,000 (1000 units @ $150.00) Cost of Goods sold - $100,000 (1000 units @ $100.00)Cost of Goods sold - $100,000 (1000 units @ $100.00) Gross Income - $50,000 ( 100,000 / 150,000) = 33% Gross profit marginGross Income - $50,000 ( 100,000 / 150,000) = 33% Gross profit margin Sales, General & Administrative (SG&A)Sales, General & Administrative (SG&A) Salaries $20,000 Salaries $20,000 Rent $10,000 Rent $10,000 Utilities $5,000 Utilities $5,000 Supplies $ 3,000 Supplies $ 3,000 Net Income (Gross income - SG&A) = $12,000 Net Income (Gross income - SG&A) = $12,000

4. FYI- Cost of goods sold is usually the cost of raw material in manufacturing and is a very high percentage of sales. It is usually lower in service based organizations.Cost of goods sold is usually the cost of raw material in manufacturing and is a very high percentage of sales. It is usually lower in service based organizations. Income statements tell the reader a story about the company for a given time. Its important to understand what each line in the statement means.Income statements tell the reader a story about the company for a given time. Its important to understand what each line in the statement means.

5. Your project - Start putting together estimates on your projects. This will require some research.Start putting together estimates on your projects. This will require some research. Critical questions:Critical questions: 1) what will it cost to produce (1) unit of my good or service?1) what will it cost to produce (1) unit of my good or service? 2) How much can I sell (1) unit of my good and service?2) How much can I sell (1) unit of my good and service? 3) What will be my costs? I.e do I need to rent an office or a warehouse?3) What will be my costs? I.e do I need to rent an office or a warehouse? 4) Do I need to borrow money and if so how much? What are the prevailing rates to borrow money in my community (call a bank / financial company if needed to get this information)4) Do I need to borrow money and if so how much? What are the prevailing rates to borrow money in my community (call a bank / financial company if needed to get this information)