...In order to determine how income statements and statements of cash flows influence business decisions, it is important to know the definition of the two. Income Statements are defined as the summaries of an entity’s revenues, expenses, gains, and losses for a period of time and thereby reports the entity’s results of operations for that period of time. It determines if an entity operates at a profit during a certain time frame, and reports revenues, expenses, gains, and losses. The Statement of Cash Flows is a financial statement that explains the change of cash flows during a fiscal period. This includes operating cost, investments, and financial activities of an entity. Its purpose is to identify the sources and uses of cash throughout a fiscal period, and report all activities involving operations, investments, and financing. Both statements are very important in making long term and short term decisions in business. Income statements are important in determining these decisions because they allow investors to determine their role in an entity’s success by viewing its operating potential, management to determine decisions within the entity dealing with material costs, sales strategies, and consumer response to those changes, and CEO’s to view revenue reports, expenses of operating costs, and the gains and losses of the entity during a defined fiscal period before making major decisions on the direction of that entity. Statement of cash flow allows CEO’s, Investors, and management...
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...Preparing an Income Statement In constructing this muli-step income statement there was only one year available of information so it was hard to compare it to a previous year and see it the numbers have decreased or increased. The information presented on an income statement are not complete and sufficient barometers of financial performance. The income statement is one of many pieces of a financial statement package, and like the other pieces, the income statement is partially the product of a wide range of accounting choices, estimates, and judgments that affect reported results, just as business policies economic conditions and many other variables affect the results. The cost of goods sold percentage for Coyote Inc is 58.5 percent. I was not able to see a previous year but this is important to know because cost of goods sold is the largest expense item for many firms. The gross profit margin figure indicates how much profit the firm is generating after deducting the cost of products or services sold and in this case it’s 41.5 percent. The operating profit measures the overall performance of the company’s operations and in this case it’s 16 percent. The net earnings or the bottom line represents the firm’s profit after consideration of all revenue and expenses reported during an accounting period in this case the net profit margin shows the percentage of profit earned on every sales dollar which is 9 percent. References Understanding Financial Statements. Eight Edition...
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...THE INCOME STATEMENT By Michael Walker Student, Technical Report Writing February 15, 2010 Formal Report Prepared for Lana Sumpter Facilitator, Technical Report Writing Date: February 15, 2010 To: Lana Sumpter, Course Administrator From: Michael Walker Subject: Final Version of “The Income Statement” Report Attached is my report “The Income Statement” which you requested at the start of class on January 7, 2010. The report contains instructions for non-financial personnel to be able to read and comprehend the income statement. The report breaks the income statement down into segments which will allow the reader to better understand the report. This report complied by myself owes a significant amount of gratitude to Benjamin Drummer (CPA, JD, Accounting Instructor) and Vicki Yamasaki (CPA, CRO, One America Insurance) for taking time out their busy schedules to help with the compilation of information. TABLE OF CONTENTS Executive Summary……………………………………………………….. 5 Introduction………………………………………………………………. 6 Background………………………………………………………………. 6 Discussion Gross Profit………………………………………………………. 6 Definitions Description Figure 1 Operating Income (Loss)…………………………………………. 7 Definitions Description Figure 2 Income from Continuing Operations before Income Tax…………. 8 Definitions Description Figure 3 Income from Continuing Operations……………………………… 10 Definitions Description Figure 4 Net Income (Loss)…………………………………………………...
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...Prepare a personal income statement for the past year, using the same format as Alice’s income statement in this chapter. Include all relevant categories of income and expenses. What does your income statement tell you about your current financial situation? For example, where does your income come from, and where does it go? My current financial situation is dire; I am on disability and have an income of less than $12,000 per year. I am a widow who lost all my assets, including my home. All my resources were needed to take care of my terminally ill husband. I do not have any large debt or loans, but I do have monthly living expenses. I have a very small apartment and pay rent. Some items are in storage and require I pay a monthly storage...
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...Eastman Kodak | | | | | | |Comparative Income Statement |2004 |2003 |Difference |Change | |Sales |13517 |12909 |608 |4.71% | |Less COGS |9548 |8734 |814 |9.32% | |G.P |3969 |4175 |-206 |-4.93% | |Selling and Admin |2507 |2618 |-111 |-4.24% | |Research & Development |854 |776 |78 |10.05% | |Restructuring and other cost |695 |479 |216 |45.09% | |Operating Income |-87 |302 |-389 |-128.8% | |add other income |161 |-51 |212 |-415.69% | |EBIT |74 |251 |-177 |-70.52% | |less interest |168 |147 |21 |14.29% | |EBT |-94 |104 |-198 |-190.38% | |less taxes ...
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...Question #6 A. Briefly state how the Income Statement is different from the Cash Flow Statement. Give examples of decisions that can be made from the information provided by each of these statements? -The income statement shows how much revenue a company has earned over a period of time, which is usually for a year. The income statement also reports the costs and expenses associated with earning the revenue. At the bottom of the income statement it shows the net inome, which shows the actual earnings after expenses, taxes, etc are taken out. This can be a net profit or net loss, depending on how the company performed that year. The cash flow statement reports a company’s inflows and outflows of cash. The income statement tells whether or not the company made a profit and the statement of cash flows tells you whether the company generated cash. The statement of cash flows is the more important of the two because with negative cash flows it makes it nearly impossible to pay off your debt. It is possible to have a positive net income, with negative cash flows. -A manager can use the income statement to analyze how much revenue is being lost due to expenses. Expenses are necessary in every business, but there are ways to manage them to save money. It also allows management and investors to decide if the company wants to expand into different markets or create new products. If they see sales are consistently increasing year over year, then it may be a good time...
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...How are the income statement and statement of cash flows used to make business decisions? The income statement reflects the company’s financial performance by showing how much money was generated (revenue), how much was spent (expenses), and the difference (profit) between the two over a period of time. It is divided into the operating and non-operating sections. It can also tell how much money shareholders would receive if the company were to distribute all of its net earnings. The cash flow statement provides cumulative information regarding all cash inflow from both its ongoing operations as well as any external investment sources. The cash flow statement is not influenced by any kind of fancy accounting concepts. It is a true reflection of the company’s operating, investing, and financing activities. It helps to show why the company either lost or gained money during that particular period in time. The statement of cash flow parallels the income statement by showing the relationship between the net income and cash flow. The income can be increasing but the cash flow decreasing if the company is not actually collecting cash from its customers. The income statement can tell you whether the company made a profit while the cash flow statement tells you whether it actually generated any cash. Put very simply, the income statement answers the question “How did we do?”, while the cash flow statement answers “Where did the money go?”. Three main groups use financial...
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...Week 6 Individual Estimating Inventory and Preparing Multiple-Step and Single-Step Income Statements Assignment Guidelines: Problem 5-4A **Please see assignment in text on pg. 212 for complete directions. 1. Compute the company’s net sales for the year. 2. Compute the company’s total cost of merchandise purchased for the year. 3. Prepare a multiple-step income statement that includes separate categories for selling expenses and for general and administrative expenses. 4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses. Part 1 Net Sales $212.00 | Sales Discount ($3,250) | Sales Returns ($14,000) | Net Sales $94,750 | | | | | Part 2 - Invoice Cost of Merchandise Purchased $91,000 | Discounts Received ($1,900) | Purchase Returns and Allowances ($4,400) | Costs of Transportation-in $3,900 | Total Cost of Merchandise Purchased $88,600 | | | | Part 3 BizKid Company | Income Statement | Year Ended August 31, 2005 | | Sales $212,000 | Less...
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...Accounting 301 June 9, 2014 Ethics Case 4 -7 Income statement presentation of unusual loss Financial statements are very important for many participants in the financing reporting process. High-quality financing reporting is necessary to investors and creditors in decision-making process. Their decisions and judgments depend on accuracy of information presented in those statements. For example, investors try to predict future performance based on the company’s current earnings. They want to invest in a company that is profitable. Misleading information in financial statements can have a negative impact on their decision. Unfortunately, some managers try to manipulate financial statement in order to achieve desired outcomes. Sometimes they intentionally misstate information to present the steady and continuous growth of the company’s earnings. Sometimes they are driven more by personal and selfish reasons. Jim Dietz is a company controller at the Cranor Corporation. They manufacture medical equipment, including x-ray machines. The company has been operating with consistent income growth for a decade. Unexpectedly, in 2013 they experienced the problem with the company’s new line of machines. The machines had a flaw in design and had to be recalled. The management acted fast to fix the design flaw and upgrade quality control procedures. However, the recall of the new line of machines resulted in $10 million loss and the company suffered a loss before taxes of $8.4 million...
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...comparative income statements and balance sheets Refer to the information for Zea1ock Bookstore in Problem 36. The following transactions relate to 2009. (1) March 15, 2009: Pays income taxes for 2008. (2) June 30, 2009: Repays the bank loan with interest. (3) July 1, 2009: Obtains a new bank loan for $75,000. The loan is repayable on June 30, 2010, with interest due at maturity of 8%. (4) July 1, 2009: Receives the security deposit back from the book distributors (5) July 1, 2009: Pays the rent due for the period Jul) 1, 2009, to June 30, 2010. (6) During 2009: Purchases books on account costing $310,000. (7) During 2009: Sells books costing $286,400 for $353,700. Of the total sales, $24,900 is for cash, $850 is from special orders received during December 2008, and $327,950 is on account. (8) During 2009: Returns unsold books costing $22,700. The firm had not yet paid for these books. (9) During 2009: Collects $320,600 from sales on account. (10) During 2009: Pays employees compensation of $29,400. (11) During 2009: Pays book distributors $281,100 for purchases of books on account. (12) December 31. 2009: Declares and pays a dividend of $4,000. a. Using T-accounts, enter the amounts for the balance sheet on December 31, 2008, from Problem 36, the effects of the 12 transactions above, and any required entries on December 31, 2009, to properly measure net income for 2009 and financial position on December 31, 2009. b. Prepare a comparative income statement for 2008...
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...Income Statement Income Statement Revenue: In this section Net Sales reveals both weakness that may be cause for alarm and strengths. We can see that strength prevailed in years 6 to 7 with a 33% increase in net sales that show substantial growth for that period, however, it became a weakness in years 7 to 8 with a 15% decrease in sales, which indicates cause for alarm among management. Due to the unique situation of our riders, sales have been affected by the decrease in sponsorships in our depressed economy. This factor should motivate us to diversify our sources of revenue to prevent such decreases in revenue in the future. Another strength in this area falls under COGS, which has maintained steady movement equivalent to sales and shows that we have made accurate projections in our purchasing decisions. A small gap does exist between our sales and our cost of goods that would allow us to realize a small increase in profit if we can reduce our COGS, so we should consider this an opportunity for improvement in this area. Operating Expenses Selling Expenses: The advertising budget has increased by 37.5% from year 6 to year 7 that shows strength in this area, and increases the chances of having the brand recognized by professional bike riders. A second strength in this area is the proportional fluctuation between some accounts and net sales that displays control of selling expenses. Aside from the strengths, there are two weaknesses in this area...
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...Assignment # 1 1. Given the following year-end balances, prepare an income statement for the year ending December 31, 20X4 and a classified balance sheet for Shelly Company dated December 31, 20X4. Interest Expense $ 2,000 Beginning Retained Earnings 13,100 Depreciation Expense 5,200 Cash 26,900 Accounts Payable 3,300 Rent Expense 7,200 Accumulated Depreciation 13,500 Wage Expense 59,200 Prepaid Rent 1,400 Contributed Capital 9,000 Accounts Receivable 13,600 Wages Payable 3,200 Equipment 63,000 Sales 249,600 Inventory 14,400 Long-term Note Payable 20,000 Income tax Expense 24,500 Dividends Declared 21,000 Cost of Goods Sold (Expense) 94,300 Dividends Payable 21,000 A) Following are the Income Statement as well as the balance sheet for Shelly Company. |Shelly Company | |Income Statement | |For the Year Ended December 31, 2004 | |---------------------------------------------------------------------------------...
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...FINANCIAL PERFORMANCE SUMMARY Income Statement Data ($000s) Net Sales Cost of Warehouse Marketing Admin Operating Revenues Pairs Sold Expenses Expenses Expenses Profit A B C D E F G H I J K Interest Exp (Inc) Income Taxes Total Dividend Payment Net Profit ($000s) Shares of Stock (000s of shares outstanding) 511,378 324,147 612,887 231,263 478,365 340,829 242,952 457,360 161,151 504,446 382,378 282,635 175,560 381,058 126,134 272,646 216,141 162,203 268,545 100,011 259,537 228,479 31,618 21,785 31,153 21,331 26,726 22,582 20,876 27,090 15,655 34,861 23,781 56,438 62,962 56,598 28,245 57,471 33,508 35,048 47,620 30,808 88,188 43,404 11,979 8,630 12,430 6,830 10,629 10,328 9,431 10,782 7,331 10,630 9,231 128,708 55,210 131,648 48,723 110,893 58,270 15,394 103,323 7,346 111,230 77,483 -1,815 -976 6,643 -1,723 -2,551 -3,486 -716 -346 -1,011 -977 -1,191 38,771 16,359 36,712 13,672 34,033 18,352 4,602 31,101 1,820 32,327 23,370 90,465 38,171 85,660 31,902 79,411 42,821 10,738 72,568 6,537 75,431 54,529 0 4,251 0 0 18,800 0 0 0 0 0 9,475 10,000 12,145 8,660 7,760 9,400 10,000 11,500 7,594 11,700 10,500 9,475 386,105 224,814 25,223 49,117 9,839 77,112 -741 22,829 53,476 2,957 9,885 Selected Balance Sheet Data ($000s) Dividend Data Shareholder Equity Current...
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...Income Statement Revenue: In this section Net Sales reveals both weakness that may be cause for alarm and strengths. We can see that strength prevailed in years 6 to 7 with a 33% increase in net sales that show substantial growth for that period, however, it became a weakness in years 7 to 8 with a 15% decrease in sales, which indicates cause for alarm among management. Due to the unique situation of our riders, sales have been affected by the decrease in sponsorships in our depressed economy. This factor should motivate us to diversify our sources of revenue to prevent such decreases in revenue in the future. Another strength in this area falls under COGS, which has maintained steady movement equivalent to sales and shows that we have made accurate projections in our purchasing decisions. A small gap does exist between our sales and our cost of goods that would allow us to realize a small increase in profit if we can reduce our COGS, so we should consider this an opportunity for improvement in this area. Operating Expenses Selling Expenses: The advertising budget has increased by 37.5% from year 6 to year 7 that shows strength in this area, and increases the chances of having the brand recognized by professional bike riders. A second strength in this area is the proportional fluctuation between some accounts and net sales that displays control of selling expenses. Aside from the strengths, there are two weaknesses in this area that falls between years 7...
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...7. How do local area networks (LANs) differ from metropolitan area network (MAN)? A local area network (LAN) is a group of microcomputers located in the same general area. It covers a clearly defined small area, such as an office, home network ,one floor or work area, a single building, or a group of buildings. While a metropolitan area network (MAN) connects LANs and BNs located in different areas to each other and to WANs. MANs typically span between three and 30 miles. For example a large university may have a network so large that it may be classified as a MAN. The MAN network usually exist to provide connectivity to local ISPs, cable tv, or large corporations but will not extend beyond the boundaries of a town, city, or metropolitan area.Thus, a MAN lets two remote nodes communicate as if they were part of the same local area network. A MAN usually consists of a number of interconnected LANs and WANs. [Dennis, A. & Fitzgerald, J. (2009), p.31. Business data communication and networking. Wiley] Also LAN are usually connected by Ethernet cables,have high speed connections and relatively inexpensive while MAN are often interconnected wirelessly using microwave radio links or fiber-optics and provide moderately fast transmission rates but can prove costly to install (very expensive). 14. Explain how a message is transmitted from one computer to another using layers? In a network of computers each computer connected must have a unique IP address. IP: 1.2.3.4 ...
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