Lunch & LearnVI:Financial Statements: Part 1Income Statement1Carolyn GoodmanCPAP.com
LemonADE Stand, Inc.2
Types of Financial StMTsIncome StatementBalance SheetStatement of Cash FlowsStatement of Retained Earnings3
QuestionWhat is the difference between:RevenueGross MarginNet Margin4
Income Statement“A financial statement that measures acompany’s financial performance over a specificaccounting period.” - in...
Income StatementRevenue (Sales, Income) $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses...
Income StatementRevenue = Sales“Total income produced by a given source” -Merriam-Webster7
INcome StatementRevenue/Sales:Sell each glass of lemonade for 50¢100 glasses sold100 * 50¢ = $508
Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net ...
INcome StatementCost of Goods Sold (COGS) (Product Costs):Each glass of lemonade costs 20¢ per glass oflemonade (cups, lem...
Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net ...
INcome StatementGross Profit (Gross Margin) - the amount ofincome you have left after product costs to coverremaining expen...
Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net ...
INcome StatementOperating Expenses (Costs):Table $10Chairs $4Decorations $6Pitcher $2Employee (Sister) $3Total Operating E...
Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net ...
INcome StatementNet Income (Net Margin, Net Profit) -Company’s total earnings (profit)Net Income does not necessarily mean y...
Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net ...
INcome Statement“The only things certain in life are death &taxes”- Benjamin Franklin18
Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Earn...
INcome StatementEarnings before taxes (EBT) - Just as it says, theamount of income after product costs andoperating expens...
Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Earn...
INcome StatementTax Expense:Assuming:a 35% income tax rateno sales taxEBT * tax rate = tax expense$5 * 0.35 = $1.7522
Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Earn...
INcome StatementCalculating ratio margins - “everything inrelation to revenue”24
Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Earn...
Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Earn...
Income StatementSales Revenue $50 100%Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30 60%Operating Expenses ...
INcome StatementLemonade Stand, Inc. decides to expand for June to 3 locations:Increases prices each lemonade glass to 75¢...
Income StatementSales RevenueNet Income (Net Margin, NetProfit)29
Income StatementSales Revenue 100%Cost of Goods Sold (COGS)Gross Profit (Gross Margin)Operating ExpensesEarnings before tax...
Income StatementSales Revenue $146.25 100%Cost of Goods Sold (COGS) ($35.10)Gross Profit (Gross Margin) $111.15 76%Operatin...
QuestionWhat is the difference between:RevenueGross MarginNet Margin32
INcome StatementBut what if Lemonade Stand, Inc. took out a loanof $100 from Parents, Inc. that charged a 10%interest rate...
Income StatementSales Revenue $146.25 100%Cost of Goods Sold (COGS) ($35.10)Gross Profit (Gross Margin) $111.15 76%Operatin...
INcome StatementHow much cash does Lemonade Stand, Inc.have?More on that next time.....35
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CPAP.com Introduction To Financial Statements, Part 1

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CPAP.com Lunch and Learn - Carolyn Goodman - Overview of Financial Statements part 1

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CPAP.com Introduction To Financial Statements, Part 1

  1. 1. Lunch & LearnVI:Financial Statements: Part 1Income Statement1Carolyn GoodmanCPAP.com
  2. 2. LemonADE Stand, Inc.2
  3. 3. Types of Financial StMTsIncome StatementBalance SheetStatement of Cash FlowsStatement of Retained Earnings3
  4. 4. QuestionWhat is the difference between:RevenueGross MarginNet Margin4
  5. 5. Income Statement“A financial statement that measures acompany’s financial performance over a specificaccounting period.” - investopediaAlso known as a “profit & loss statement” (P&L)Revenue - Expenses = Net Income5
  6. 6. Income StatementRevenue (Sales, Income) $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net Income (Net Margin, NetProfit)$5Lemonade Stand, Inc. May 2013 Income Statement6
  7. 7. Income StatementRevenue = Sales“Total income produced by a given source” -Merriam-Webster7
  8. 8. INcome StatementRevenue/Sales:Sell each glass of lemonade for 50¢100 glasses sold100 * 50¢ = $508
  9. 9. Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net Income (Net Margin, NetProfit)$59
  10. 10. INcome StatementCost of Goods Sold (COGS) (Product Costs):Each glass of lemonade costs 20¢ per glass oflemonade (cups, lemons, sugar)100 glasses sold100 * 20¢ = $2010
  11. 11. Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net Income (Net Margin, NetProfit)$511
  12. 12. INcome StatementGross Profit (Gross Margin) - the amount ofincome you have left after product costs to coverremaining expenses12
  13. 13. Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net Income (Net Margin, NetProfit)$513
  14. 14. INcome StatementOperating Expenses (Costs):Table $10Chairs $4Decorations $6Pitcher $2Employee (Sister) $3Total Operating Expenses $2514
  15. 15. Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net Income (Net Margin, NetProfit)$515
  16. 16. INcome StatementNet Income (Net Margin, Net Profit) -Company’s total earnings (profit)Net Income does not necessarily mean yourending cash balanceIncome Statement is not a Cash Flow Statement16
  17. 17. Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Net Income (Net Margin, NetProfit)$517
  18. 18. INcome Statement“The only things certain in life are death &taxes”- Benjamin Franklin18
  19. 19. Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Earnings before taxes (EBT) $5Tax Expense ($1.75)Net Income (Net Margin, Net Profit) $3.2519
  20. 20. INcome StatementEarnings before taxes (EBT) - Just as it says, theamount of income after product costs andoperating expenses, before taxes are factored20
  21. 21. Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Earnings before taxes (EBT) $5Tax Expense ($1.75)Net Income (Net Margin, Net Profit) $3.2521
  22. 22. INcome StatementTax Expense:Assuming:a 35% income tax rateno sales taxEBT * tax rate = tax expense$5 * 0.35 = $1.7522
  23. 23. Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Earnings before taxes (EBT) $5Tax Expense ($1.75)Net Income (Net Margin, Net Profit) $3.2523
  24. 24. INcome StatementCalculating ratio margins - “everything inrelation to revenue”24
  25. 25. Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Earnings before taxes (EBT) $5Tax Expense ($1.75)Net Income (Net Margin, NetProfit)$3.25Gross Margin % =Gross Profit / Revenueor:(Revenue - COGS) /Revenue$30/$50 = 60%or($50-$20) / $50 = 60%25
  26. 26. Income StatementSales Revenue $50Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30Operating Expenses ($25)Earnings before taxes (EBT) $5Tax Expense ($1.75)Net Income (Net Margin, NetProfit)$3.25Profit Margin % =Net Income / Revenueor:(Revenue - COGS -Expenses) / Revenue$3.25/$50 = 6.5%or($50-$20-$25-$1.75) / $50= 6.5%26
  27. 27. Income StatementSales Revenue $50 100%Cost of Goods Sold (COGS) ($20)Gross Profit (Gross Margin) $30 60%Operating Expenses ($25)Earnings before taxes (EBT) $5 10%Tax Expense ($1.75)Net Income (Net Margin, NetProfit)$3.25 6.5%27
  28. 28. INcome StatementLemonade Stand, Inc. decides to expand for June to 3 locations:Increases prices each lemonade glass to 75¢ eachCost per glass of lemonade 18¢Cost per table $10 (3 tables) = $30Cost per chair $2 (3 chairs) = $6Cost of decorations $15Cost per pitcher $1 (3 pitchers) = $3Employees (Sister & Friend) $3035% tax rateSold 195 glasses of lemonade28
  29. 29. Income StatementSales RevenueNet Income (Net Margin, NetProfit)29
  30. 30. Income StatementSales Revenue 100%Cost of Goods Sold (COGS)Gross Profit (Gross Margin)Operating ExpensesEarnings before taxes (EBT)Tax ExpenseNet Income (Net Margin, NetProfit)30
  31. 31. Income StatementSales Revenue $146.25 100%Cost of Goods Sold (COGS) ($35.10)Gross Profit (Gross Margin) $111.15 76%Operating Expenses ($84.00)Earnings before taxes (EBT) $27.15 19%Tax Expense ($9.50)Net Income (Net Margin, NetProfit)$17.65 12.1%31
  32. 32. QuestionWhat is the difference between:RevenueGross MarginNet Margin32
  33. 33. INcome StatementBut what if Lemonade Stand, Inc. took out a loanof $100 from Parents, Inc. that charged a 10%interest rate for the expansion?33
  34. 34. Income StatementSales Revenue $146.25 100%Cost of Goods Sold (COGS) ($35.10)Gross Profit (Gross Margin) $111.15 76%Operating Expenses ($84.00)Earnings before interest & taxes (EBIT) $27.15 19%Interest Expense ($10)Earnings before taxes (EBT) $17.15 12%Tax Expense ($6.00)Net Income (Net Margin, Net Profit) $11.15 7.6%34
  35. 35. INcome StatementHow much cash does Lemonade Stand, Inc.have?More on that next time.....35

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