The “Bottom Line”
The income statement shows how much revenue a company earned over a defined period (typically a year or a quarter), plus the costs and expenses related to generating that revenue. The “Bottom Line” demonstrates net earnings or losses over the period.
Income statements also show earnings per share (EPS). EPS shows how much money shareholders would receive if all of the net earnings for the period were distributed. (A highly unlikely occurrence; they’re usually reinvested.)
Income statements are set up stepwise. Starting at the top we see the total amount of sales made during the accounting period. As you go down, you subtract costs and additional operating expenses related to producing the revenue. After subtracting all expenses, …show more content…
Included are: administrative salaries, R&D costs for new products, and marketing expenses. We classify Operating Expenses differently from Cost of Sales, because we cannot link Operating Expenses directly to product or service creation. Depreciation, taking into account the wear and tear on some long term assets, such as machinery, tools and furniture, is also deducted from gross profit. The cost of the asset is Depreciated or Amortized (spread) over the estimated useable life of the asset. We expense a fraction of the original cost of all assets during the period. This is not a check we write, but is referred to as a non-cash expense …show more content…
Earnings per Share (EPS)
Income statements from public companies include a calculation of earnings per share or EPS. To calculate EPS, total net income is divided by the number of outstanding shares of the company.
Income statement summarizes a company’s revenues and expenses for a specific time period. Revenues generally result from selling the merchandise or providing the services that have been chosen for the company’s primary business activity. More formally, revenues increase assets or decrease liabilities and result from an entity’s profit-oriented activities.
Expenses are legitimate costs of doing business. Expenses decrease assets or increase liabilities. The costs of salaries, rent, utilities, marketing, and insurance are common expenses. In addition, the cost of the products sold to customers is an extremely large expense for manufacturers and merchandisers.
Terminology
Various types of expenses must be classified in order to generate the different types of
The income statement shows how much revenue a company earned over a defined period (typically a year or a quarter), plus the costs and expenses related to generating that revenue. The “Bottom Line” demonstrates net earnings or losses over the period.
Income statements also show earnings per share (EPS). EPS shows how much money shareholders would receive if all of the net earnings for the period were distributed. (A highly unlikely occurrence; they’re usually reinvested.)
Income statements are set up stepwise. Starting at the top we see the total amount of sales made during the accounting period. As you go down, you subtract costs and additional operating expenses related to producing the revenue. After subtracting all expenses, …show more content…
Included are: administrative salaries, R&D costs for new products, and marketing expenses. We classify Operating Expenses differently from Cost of Sales, because we cannot link Operating Expenses directly to product or service creation. Depreciation, taking into account the wear and tear on some long term assets, such as machinery, tools and furniture, is also deducted from gross profit. The cost of the asset is Depreciated or Amortized (spread) over the estimated useable life of the asset. We expense a fraction of the original cost of all assets during the period. This is not a check we write, but is referred to as a non-cash expense …show more content…
Earnings per Share (EPS)
Income statements from public companies include a calculation of earnings per share or EPS. To calculate EPS, total net income is divided by the number of outstanding shares of the company.
Income statement summarizes a company’s revenues and expenses for a specific time period. Revenues generally result from selling the merchandise or providing the services that have been chosen for the company’s primary business activity. More formally, revenues increase assets or decrease liabilities and result from an entity’s profit-oriented activities.
Expenses are legitimate costs of doing business. Expenses decrease assets or increase liabilities. The costs of salaries, rent, utilities, marketing, and insurance are common expenses. In addition, the cost of the products sold to customers is an extremely large expense for manufacturers and merchandisers.
Terminology
Various types of expenses must be classified in order to generate the different types of