The document discusses income statements, their purpose and key components. It explains that income statements are prepared periodically to show business performance and include revenue, costs of goods sold, gross profit, operating expenses, pre-tax profit and net profit. It also discusses the importance of cash flow for entrepreneurs and calculating a company's burn rate to understand how long it can operate without generating revenue.

1. Explain the importance of an income statement Identify the parts of an income statement Prepare an income statement Understand how cash flow affects entrepreneurs Demonstrate a burn-rate calculation

2. Income statements are prepared periodically to show how a business is performing: Monthly Quarterly Annually Income statements differ in how they show their variable expenses. They may appear under: Cost of Goods Sold Cost of Goods Manufactured and Sold Cost of Services Sold

3. Income statements generally include these parts: Revenue . The money the business receives from selling products or services. Cost of Goods Sold . The cost of producing the goods or services. Gross Profit . Net sales minus the cost of goods sold. Operating Expenses . The expenses of running the business. Pre-Tax Profit . Gross profit minus the operating expenses. Net Profit (Loss) . Pre-tax profit minus taxes.

6. To prepare an income statement: Determine the business's Revenue. Calculate the Cost of Goods Sold. Determine the Gross Profit. Calculate Operating Expenses. Determine the Pre-Tax Profit. Determine the Net Profit or Loss.

7. The cash flow equation is: A cash flow statement is a financial document that records inflows and outflows of cash when they actually occur.

8. Five ways to avoid being caught without enough cash to pay your bills are: Collect Cash as Soon as Possible Pay Bills Close to the Due Date Keep Track of Your Cash Lease Equipment Keep Inventory to a Minimum Cash flow is cyclical for many businesses, meaning that it varies according to the time of year.

9. Use the burn rate to calculate how long a company can go without revenue.