Financial Statement
Financial Statement
Financial Statement
Another way of describing general and administrative expenses is any expense that will
still be incurred, even in the absence of any sales or selling activity.
GENERAL EXPENSES are the costs a business incurs as part
of its daily operations, separate from selling and administration
expenses. Together, general, selling and administration (SG&A)
expenses make up a company’s operating expenses.
Non-Operating Expenses
Some business expenditures are incurred for reasons that don’t involve normal business
operations. One example of a non-operating expense is interest on borrowed money. Non-
operating expenses also include one-time or unusual costs. The expenditure required for a
business reorganization as the result of a bankruptcy, or to pay expenses due to a lawsuit,
are common examples of non-operating expenses. Charges for obsolescence of equipment
or currency exchange are also non-operating expenses.
Non-operating revenue would include such items as dividend income, profits (and losses)
from investments, gains (and losses) incurred due to foreign exchange, asset write-downs,
and other non-operating revenues and expenses.
As an example, for a hospital, in addition to finance-related revenue, non-operating revenue
may include parking fees, revenue from the gift shop, cafeteria sales, or rental income.
EBIT – earnings before interest and taxes
SGA
EBIT
MORE ON
INCOME STATEMENT
MULTI-STEP INCOME STATEMENT
1 GROSS REVENUE
2 LESS COST OF GOODS SOLD
3 GROSS PROFIT OR GROSS MARGIN
4 LESS S, G, & A EXPENSES (NOT DIRECTLY RELATED TO PRODUCING
GOODS FOR SALE SUCH AS UTILITIES, WAGES, SALES COMMISIONS,
OFFICE RENT, LEGAL AND ACCOUNTING FEES)
5 LESS DEPRECIATION
6 OPERATING PROFIT (EBIT)
7 LESS INTEREST EXPENSES (FOR DEBT THE COMPANY OWES)
8 EBT (EARNINGS BEFORE TAXES)
9 LESS TAXES
10 EARNINGS AVAILABLE TO COMMON SHAREHOLDERS
11 LESS DRAWING OR DIVIDENDS
12 NET INCOME (PROFIT) → RETAINED EARNINGS (OWNERS’ EQUITY)
(40 points)
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