Download
1 / 18

Business Management - PowerPoint PPT Presentation


  • 76 Views
  • Uploaded on

Unit 4 Income Statements. Business Management. Business Analysis. Risk Solvency. Feasibility Liquidity Repayment Capacity. Statement of Cash flows. Balance Sheet. Statement of Owners’s Equity. Income Statement. Profitability Financial Efficiency. Income Statement.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' Business Management' - paytah


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.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Unit 4 income statements

Unit 4 Income Statements

Business Management


Business Analysis

Risk

Solvency

Feasibility

Liquidity

Repayment

Capacity

Statement of Cash flows

Balance Sheet

Statement

of

Owners’s

Equity

Income Statement

Profitability

Financial Efficiency


Income statement
Income Statement

Definition: A summary of income and expenses for a given period of time.


Uses of the income statement
Uses of the Income Statement

  • Reporting income and expenses on tax returns

  • Required on loan applications

  • Financial analysis of business

  • Explain changes in Owner’s Equity


Reporting income and expenses
Reporting Income and Expenses

  • Cash Method

  • Accrual Method


Cash method
Cash Method

  • Income must be reported in the year the cash, or its equivalent is received.

  • Deductions for expenses are made in the year that the cash is paid out.


Cash method advantages
Cash method- Advantages

  • Flexibility- choose when to take income and deduct expenses.

  • More favorable capital gains tax treatment than accrual method.

  • If business shows a profit, cash is available to pay the income tax.


Cash method disadvantages
Cash Method- Disadvantages

  • Expenses are not deductible until cash is paid.

  • Inventory adjustments must be made to compute an income statement and analysis information.

  • Income reported is more erratic.


Cash transactions
Cash Transactions

  • Cash Revenue

  • Cash Expenses-summary and coded

  • Depreciation

  • Gain or Loss on Sales of Capital Assets- Capital Gains/Losses


Cash income statement
Cash Income Statement

  • Do Assignment #1---Cash Income Statement for GYFS

  • Information on Website

  • Create a new page in your Excel spreadsheet assignment file.


Accrual method
Accrual Method

  • Inventories must be used to determine gross income. Sales are treated as income when the price of the item is recoverable.

  • Expenses are deductible when payable.


Accrual method advantages
Accrual Method-Advantages

  • Levels out peaks and valleys of income without year-end manipulations.

  • Easier to determine net income and analyze strong and weak points of the business from year to year than with the cash method.


Accrual method disadvantages
Accrual Method-Disadvantages

  • very detailed and complex records are required.

  • Inventory must be valued by an approved IRS method.

  • In some years profit may only appear on paper, and money may have to be borrowed to pay income tax.

  • Difficult to determine actual cash position of the business.


Variable costs
Variable Costs

  • Costs that vary with production levels


Fixed costs
Fixed Costs

  • Costs that remain constant with changes in production


Analysis
Analysis

  • Operating ratio=

  • Fixed ratio=

  • Gross ratio=


ad