Business Finance
ENT588 University of Phoenix Balance Sheet and Cash Flow Statement Paper

ENT588

University of Phoenix

Question Description

Create a 350-word Executive Summary that further expalins your venture

  • Review the revenue and expense items
  • Review the budget, income statement, and cash flow items,
  • Develope a Balance Sheet showing Current Assets (Cash), Buildings and Equipment, Liabilities and Owners Equity.

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Running head: INCOME STATEMENT SUMMARY Income Statement Summary Jessica McNairy University Of Phoenix 3/26/18 1 INCOME STATEMENT SUMMARY 2 Income Summary The income statement is one of the three primary financial statements used to assess a company’s performance and financial position (the two others being the balance sheet and the cash flow statement). The income statement provides information about the revenue, expenses, gains, and losses of the company. The expenses are the costs to the company which it incurs during its mode of operation. Sections of the Income Summary The Roses, Roses, Roses Flower Shop total revenue for Jan1, 2017 thru Dec 31, 2017 was $20,000. This revenue was obtained by the selling merchandise from the flower shop. The primary activities of a retailer are purchasing merchandise and selling the merchandise. The basic equation on which an income statement is based is: Revenue (for the period) − Expenses (for the period) = Net Income or Loss (for the period) The Roses, Roses, Roses Flower Shop is a new business and the cost of goods sold was monitored very carefully. Only necessary products such as flowers and containers as well as any costs directly associated with the sale, such as delivery of the flowers were included. The cost of goods sold for the year of 2017 was $6,000.The gross profit for the flower store was: Revenue $20,000-Cost of Goods Sold $6,000= Gross Profit $14,000 INCOME STATEMENT SUMMARY 3 Operating expenses include things such as salaries, rent, and utilities which are sometimes referred to as non-manufacturing expenses.The sum total of the operating expenses from the flower shop equaled to $7,700. “Pretax operating income is the primary measurement of the total earnings generated by the firm without regard to taxes and net interest income (expense). This measurement is an intermediate measure of firm performance that helps describe the firm’s economic results over a period” (Gibbons, 2015). The pretax operating income for the flower shop for 2017 is $6,300.Pretax is determined by the following formula” Gross Profit $14,000 -Operating Expenses $7,700= Pretax Operating Income $6,300 Profit before tax (PBT) is a profitability gauge that looks at a business's profits before the businessmust pay corporate income tax by deducting all expenses from revenue including interest expenses and operating expenses except for income tax. The formula used to determine this number is: Pretax Operating Income $6,300-Interest Expense $500= Profit before tax (PBT) $5,800 Theincome taxes are typically filed on an annual basis. However, Roses, Roses, Roses Flower Shop met with a tax accountant monthly to help estimate the income tax spent. This first year the income tax expense was $ 500. The net income is one of the most important numbers in the bottom line of any business. It tells you how profitable the business is after every single one of its expenses have been accounted INCOME STATEMENT SUMMARY 4 for. If this number is a negative, it will show you how much money a business has lost in a period. The flower shop’s net income was $4,300. This number was determined by the formula: Profit before tax (PBT) $5,800- Income Tax Expenses $500=Net Income $4,300 Conclusion The flower shop’s income statement is critical for identifying the overall wellbeing of the business. It shows that for a first year the business has made a profit in a competitive business. The income statement will also give us much needed data as to how to adjust expenses and calculate interest expense to increase the profit in the year to come. INCOME STATEMENT SUMMARY 5 Roses, Roses, Roses Flower Shop for the year ended December 31, 2017 Total Revenue Cost of Goods Sold $20,000 $ 6,000 $20,000 $ 6,000 Gross Profit Operating Expenses $14,000 $14,000 Salaries Rent Utilities Depreciation Amortization $2,000 $4,000 $1,000 $ 500 $ 200 $7,700 Total Operating Expenses Pre-Tax Operating Income $6,300 Interest Expense $ 500 Profits before Taxes Income Tax Expenses $5,800 $1,500 Net Income $4,300 INCOME STATEMENT SUMMARY 6 References Leach, J. C., &Melicher, R. W. (2011). Entrepreneurial finance Boston, Massachusetts: Cengage Learning. Income Statement (2017) Retrieved fromhttp://www.investinganswers.com/dictionary/incomestatement Gibbons, G., Hisrich, R.D., & DeSilva, C.M. (2015). Entrepreneurial Finance: A Global Perspective (1st Ed). Thousand Oaks, CA: SAGE. Gluskin, D. (2015). How to Write an Income Statement Retrieved from https://www.careeraddict.com/write-an-income-statement . ...
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charle (439)
Purdue University

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