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Introduction to financial reporting analysis - McClure B.B.

McClure B.B. Introduction to financial reporting analysis - wiley publishing , 2009. - 596 p.
Download (direct link): introductiontofinancialrepor2009.pdf
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Net Sales $XXX
Other Income XXX
Total Revenue XXX
Cost of Goods Sold (cost of sales) XXX
Operating Expenses (selling and administrative) XXX
Other Expense XXX
Income Tax Expense XXX
Total Expenses XXX
Net Income $XXX
Earnings per Share $XXX
A single-step income statement lists all revenues and gains (usually in order of amount), then lists all expenses and losses (usually in order of amount). Total expense and loss items deducted from total revenue and gain items determine the net income. Most firms that present a single-step income statement modify it in some way, such as presenting federal income tax expense as a separate item.
Exhibits 4-1 and 4-2 illustrate the different types of income statements. In Exhibit 4-1, Wendy’s uses a single-step income statement, while in Exhibit 4-2, Ben and Jerry’s uses a multiple-step format.
For firms that have cost of goods sold, cost of goods manufactured, or cost of services, a multiple-step income statement should be used for analysis. The multiple-step provides intermediate profit figures useful in analysis. You may need to construct the multiple-step format from the single-step.
Exhibit 4-3 contains a comprehensive multiple-step income statement illustration. This illustration resembles the vast majority of income statements as presented in the United States.
An income statement summarizes revenues and expenses and gains and losses, and ends with the net income for a specific period. A multiple-step income statement usually presents separately the gross profit, operating income, income before income taxes, and net income. A simplified multiple-step income statement might look as follows:
Net Sales (Revenues) $XXX
- Cost of Goods Sold (cost of sales) XXX
Gross Profit XXX
- Operating Expenses (selling and administrative) XXX
Operating Income XXX
+(-) Other Income or Expense XXX
Income Before Income Taxes XXX
- Income Taxes XXX
Net Income $XXX
Earnings per Share $XXX
Income Statement 129
WENDY’S INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Statements of Income Single-Step Income Statement
Fifty-three weeks ended January 3, 1999 and fifty-two weeks ended December 28, 1997 and December 29, 1996
(In thousands, except per share data) 1998 1997 1996
Retail sales $1,586,145 $1,651,689 $1,566,888
Franchise revenues 362,094 385,641 330,256
1,948,239 2,037,330 1,897,144
Costs and expenses
Cost of sales 995,966 1,026,026 976,666
Company restaurant operating costs 359,815 389,534 379,404
Operating costs 67,318 63,175 54,710
General and administrative expenses (Note 3) 183,486 232,983 136,461
Depreciation and amortization of property and
equipment 95,396 95,638 88,957
Write-down of certain international assets and
related charges (Note 2) 33,893
Other expense (income) 2,665 6,899 (683)
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