Accounting for the Numberphobic

CHAPTER 2

The Net Income Statement

The Key to Growing Your Profits

As you saw in Chapter 1, the first question your financial dashboard answers is whether or not the business is making a profit. Your Net Income Statement reveals the answer to this burning question.

The bird’s-eye view of the Net Income Statement breaks down as follows:

•    Net revenue (This is sales less any discounts; it’s the money coming into your company.)

•    Less: Cost of goods sold (These are your direct product or service costs.)

•    Gross margin (This is what’s left before operating expenses.)

•    Less: Fixed expenses (These are expenses like rent.)

•    Less: Variable expenses (These are expenses like marketing.)

•    Earnings before taxes (EBT)

•    Less: Taxes ...