1 / 11

Entrepreneurship

Entrepreneurship . Chapter 7 Using an Income Statement to Guide a Business. Entrepreneurs Use 3 Financial Statements. Income statement Cash flow statement Balance sheet Data for the financial statements comes from the accounting journal.

paulos
Download Presentation

Entrepreneurship

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Entrepreneurship Chapter 7 Using an Income Statement to Guide a Business Mariotti: Entrepreneurship

  2. Entrepreneurs Use 3 Financial Statements • Income statement • Cash flow statement • Balance sheet • Data for the financial statements comes from the accounting journal. • The statements show the health of the business at a glance. Marriotti: Entrepreneurship

  3. Income Statement: Scorecard for the Entrepreneur • Prepared monthly and at end of fiscal year • Also called “profit and loss statement” • Shows whether or not business is making a profit • Profit is entrepreneur’s reward for adding value to scarce resources Marriotti: Entrepreneurship

  4. 8 Parts of the Income Statement • Revenue • Cost of Goods Sold (COGS) • Other Variable Costs • Contribution Margin (a.k.a. Gross Profit) • Fixed Operating Costs (USAIIRD) • Pre-Tax Profit • Taxes • Net Profit/(Loss) Marriotti: Entrepreneurship

  5. Income Statement Marriotti: Entrepreneurship

  6. A Simple Income Statement Marriotti: Entrepreneurship

  7. Return on Investment (ROI) • You “invest” time, energy or money into something because you expect a “return” of money or satisfaction. • Return on investment (ROI) measures return as a percentage of the original investment. Net Profit/Investment X 100 = ROI% What you made over what you paid, times 100. Marriotti: Entrepreneurship

  8. To Calculate ROI for a Business, You Need 3 Things: • Net Profit: found on bottom line of the income statement. • Investment: all money used to start the business (Start-Up Investment) plus additional money invested later. • The period of time for which you are calculating ROI (typically one month or one year). Marriotti: Entrepreneurship

  9. Income Statement for a More Complex Business Marriotti: Entrepreneurship

  10. Use Financial Ratios to Analyze an Income Statement • Express each line of the income statement as a percentage by dividing sales into it and multiplying by 100. • This makes it easy to see how each item is affecting the business’s profit. • Net Income/Sales is called Return On Sales (ROS) • Fixed Operating Costs/Sales is called Operating Ratio INSERT FIG FROM BOTTOM OF PG 189 Marriotti: Entrepreneurship

  11. Same Size Analysis: Used to Compare Income Statements Marriotti: Entrepreneurship

More Related