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A basic overview of income statement items shows how a manufacturing company might present an income statement. Income statements for other companies may appear to be slightly different, but in general the construction would be the same.
An important concept in understanding the income statement is Earnings Per Share (EPS). The EPS for a company is net income divided by the number of shares of common stock outstanding. It represents the bottom line for a company.
Companies continually make decisions on how their bottom line will be impacted since shareholders in the company are concerned with how management decisions affect individual shareholder position.
Income Statement
Products, Inc. |
| ? |
Sales 125,000 units @$125 each
Less: Cost of Goods Sold
|
$ |
15,625,000
10,000,000 |
| ? |
Gross Profit
Less: Selling, General, Administrative Costs |
|
5,625,000
2,350,000 |
| ? |
Operating Income Before Depreciation
Less: Depreciation, Amortization, Depletion |
|
3,275,000
10,500 |
| ? |
Operating Profit
Less: Interest Expense |
|
3,264,500
90,000 |
| ? |
Nonoperating Income
Less: Nonoperating Expenses |
|
40,000
50,000 |
| ? |
Pretax Accounting Income
Less: Income Taxes |
|
3,164,500
1,550,000 |
| ? |
Income Before Extraordinary Items
Less: Preferred Stock Dividends |
|
1,614,500
90,000 |
| ? |
Income Available for Common Stockholders
Less: Extraordinary Items
Less: Discontinued Operations |
|
1,524,500
20,000
500,000 |
| ? |
Adjusted Net Income |
$ |
1,004,500 |
| ? |
Earnings Per Share (900,000 shares of stock) |
|
$1.12 |
|
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