Understanding Financial Statements Bizzer Professional Training


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Please review the information below
The Income Statement
The Income Statement shows a firm's revenues and expenses, and taxes associated with those expenses for some financial period. Where the Balance Sheet may be thought of in terms of the "left–right" orientation previously discussed, the income statement would be thought of in "top–down" terms.

A basic overview of income statement items shows how a manufacturing company might present an income statement. Income statements for other companies may appear to be slightly different, but in general the construction would be the same.

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Income Statement
Bizzer, Inc.

  Sales 125,000 units @$125 each
  Less: Cost of Goods Sold

$
 

15,625,000
10,000,000



  Gross Profit
  Less: Selling, General, Administrative Costs

 
 

5,625,000
2,350,000



  Operating Income Before Depreciation
  Less: Depreciation, Amortization, Depletion

 
 

3,275,000
10,500



  Operating Profit
  Less: Interest Expense

 
 

3,264,500
90,000



  Nonoperating Income
  Less: Nonoperating Expenses

 
 

40,000
50,000



  Pretax Accounting Income
  Less: Income Taxes

 
 

3,164,500
1,550,000



  Income Before Extraordinary Items
  Less: Preferred Stock Dividends

 
 

1,614,500
90,000



  Income Available for Common Stockholders
  Less: Extraordinary Items
  Less: Discontinued Operations

 
 
 

1,524,500
20,000
500,000


 

Adjusted Net Income

$


1,004,500
 
 
 
Earnings Per Share (900,000 shares of stock)
 
 
 
$1.12


An important concept in understanding the income statement is Earnings Per Share (EPS). The EPS for a company is net income divided by the number of shares of common stock outstanding. It represents the bottom line for a company.

Companies continually make decisions on how their bottom line will be impacted since shareholders in the company are concerned with how management decisions affect individual shareholder position.  


 


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