Income Statement Review

What are two other terms for the income statement?

1. Statement of operations

2. P&L (profit and loss)

What does revenues (sales) (TOP LINE) - COGS equal?

Gross profit

What does gross profit - operating expenses equal?

EBIT or Operating income

What does operating income - interest expense equal?

EBT (earnings before taxes)

What is EBT - taxes?

Net income (BOTTOM LINE)

What are other terms for revenue?

profit and income

What are other terms for EBIT?

Operating income and operating income

What are other terms for net income?

Net profit, net earnings, bottom line

How do you calculate net sales?

sales - sales returns - sales discounts

What are sales discounts?

Discounts given to A/R customers for paying early

ie: 2/10 - if customers pays within 10 days, they can take a 2 discount

What are sales returns?

When customers bring back a product that they’ve decided they don’t want or don’t like

What are markdowns?

Reduction in the original sales price of a product

What is top line?

Revenues (sales)

What is bottom line?

Net income

How do you calculate gross profit margin?

Gross profit / sales

What are 3 interpertation’s of the gross margin?

1. % of sales

2. % sales available for operating, interest, taxes expense and as profit

3. (100% - gross margin) = % of COG

What are examples operating expenses?

Rent, utilities, insurance, workers salaries, depreciation

What are operating expenses?

Costs to run a business

How do you calculate net profit margin?

net profit / sales

What are three interpretations of net profit margin?

1. % of sales remaining after all expenses

2. % of sales that is profit for the owners

3. (100% - net profit) = % of sales that was used for all the expenses