The income statement is the one we all tend to focus our attention on because it provides the proverbial “bottom line”— the company’s profit or loss. It’s usually done on a quarterly basis.
As you look at the basic income statement you’ll notice that it seems a lot like the cash flow statement. You start with your revenues less commissions. From that, you subtract direct labor (drafters and architects, for instance, for an architectural firm) and materials.
The result is a subtotal that gives you your gross profit or loss. (The percentage of gross profit to revenues can be a very useful number. It’s your gross margin and can help you compare yourself with others in your industry—it tells you immediately whether your labor or other costs are way out of line.) Read the rest of this entry »
Posted by DodoLovesMe
