What is an Income Statement?

1. What is an Income Statement? • Shows financial results of a company over a given period of time • Includes: • Revenues • Cost of Sales (costs directly attributable to the products/services sold) • Other Operating Expenses • Marketing, Sales • Research and Development • General and Administrative • Earnings before Tax • Operating Income • Tax • Earnings after Tax

2. A financial statement that measures a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscalمالي quarter or year.Also known as the "profit and loss statement" or "statement of revenue and expense".   The income statement is the one of the three major financial statements. The other two are the balance sheet and the statement of cash flows. The income statement  is divided into two parts: the operating and non-operating sections.then this information would be in the non-operating items section.

3. The portion of the income statement that deals with operating items is interesting to investors and analysts alike because this section discloses يكشفinformation about revenues and expenses that are a direct result of the regular business operations. For example, if a business creates sports equipment, then the operating items section would talk about the revenues and expenses involved with the production of sports equipment.The non-operating items section discloses revenue and expense information about activities that are not tied directly to a company's regular operations. For example, if the sport equipment company sold a factory and some old plant equipment, then this information would be in the non-operating items section.

4. Sample Income Statement

5. Income Statement Questions • What is Revenue? • What is Cost of Goods sold? • What are some of the components of operating expenses? • What is operating profit?

6. Years 1 2 3 4 5 Revenues $13.1 $54.3 $143.3 $230.2 $321.2 Cost of Goods Sold $15.6 $28.8 $54.1 $82.4 $112.1 Other Operating Expenses $23.8 $32.1 $64.5 $100.4 $140.3 Operating Income -$26.3 -$6.6 $24.8 $47.4 $68.8 Operating Margin -201.2% -12.2% 17.3% 20.6% 21.4% Pro-forma Income Statement Income Statement ($m) A B C D=A-B-C E=D/A

7. Exhibits for Detailed Financials • Typically: 5 years on an annual basis and month-to-month for the first year • Components: • Assumptions and Outcomes Page • Income Statement • Detailed Revenue • Detailed Expenses • Headcount • Return on Investment • Balance Sheet • Cash Flow

8. Assumptions and Outcomes • Shows key assumptions and the outcomes in terms of profits, etc. • Helps show the reasonableness of your analysis • Tells the story in summary form, in case someone only looks at this page

9. Income Statement • Revenues • Summarizes components of revenue • Expenses • Cost of goods sold • Other major components of operating expenses • Sales, marketing, general and administrative • Research and Development, etc. • Earnings before income and tax (or operating income) • Tax • Profit after tax

10. Detailed Revenue • Shows revenue over time divided into key components: • Product areas • Geographies • Any components that make sense • Documents assumptions and their effects

11. Detailed Expenses • Summarizes key expense categories in major detail • Documents assumptions not summarized elsewhere

12. Payrollقائمة الرواتب and Headcount • Who are you going to hire • When will they start? • How much will they earn? • Cost of benefits, etc.

13. Return on Investment • Expected investment • Expected share of ownership • Change in share of ownership due to other investments • Returns on the investment, including dividends الحصصand some “terminalنهائي value” • Discount cash flows to show Internal Rate of Return and Net Present Value

14. What is a Balance Sheet? • A snapshot of a company’s financial position at a moment in time • Left hand side = Assets • Right hand side = Liabilities and Equities • Assets must equal liabilities plus equities (hence it is a “balance” sheet)

15. Balance Sheet

16. What is an Asset? Assets are valuable resources owned by an entity and include: • Cash • Things that are likely to become cash soon (inventories, accounts receivable) • Valuable things that help the business produce revenues over a longer period (property, plant, and equipment, etc.)

17. What is a Liability? Liabilities are the claims of creditors and include: • Accounts payable • Notes payable this year • Longer term obligationsالتزامات, such as long term debtدين

18. What is an Equity? Equities reflect the “claims” of investors and include: • Paid in capital • “Retained Earnings” or the sum total of profits after tax that haven’t been paid out through dividendsالحصص Note: You can’t cash in equities—they represent a claim on the business not an asset.

19. Cash Flow Statement • Records the Flow of Cash during a given period • Cash inflows include: • Profits • Sale of assets • Reduction in: • Accounts Receivables • Other assets • Cash outflows include: • Losses • Purchase of assets • Increase in: • Accounts Receivables • Other assets

20. Cash Flow Statement