Income Statement Exercise
In the white boxes below are income statement items for 2015 and 2016.
Step 1: Copy and paste all items in the white boxes below into the correct white boxes on the next tab in
columns B, D and F (the 'Questions' tab).
Step 2: On the right side of the income statement that you created in step 1 (on the Questions tab), answer (in column L) wh
not the change in the balance sheet line item from the previous year is a concern or not. Simply enter "Yes" or "No".
Step 3: If you answered "Yes" in column L, then please state why this is a concern in the white box in column M.
Step 4: Check to see if your answers are correct on the "Answers" tab and please watch the next lecture for an explanation o
Income Statement Items (Sorted Alphabetically) 12/31/2015 12/31/2016
Cost of Good Sold ('C.O.G.S') $ 700,000 $ 800,000
Depreciation & Amortization $ 5,000 $ 5,000
General and Administrative ('G&A') $ 85,000 $ 105,000
Interest $ 49,500 $ 59,500
Research and Development ('R&D') $ 60,000 $ 80,000
REVENUE $ 1,520,500 $ 1,400,000
Sales and Marketing ('S&M') $ 120,000 $ 140,000
Taxes $ 125,250 $ 52,625
INCOME STATEMENT (Question Sheet)
$ Change from % Change from
12/31/2015 12/31/2016 2015 to 2016 2015 to 2016
$ - #DIV/0!
EXPENSES:
$ - #DIV/0!
GROSS PROFIT GROSS PROFIT MARGIN (% $ - $ - $ - #DIV/0!
OF REVENUE) ### ###
$ - #DIV/0!
S&M as a % of Revenue ### ###
$ - #DIV/0!
R&D as a % of Revenue ### ###
$ - #DIV/0!
G&A as a % of Revenue ### ###
TOTAL OPERATING EXPENSES $ - $ - $ - #DIV/0!
OPERATING PROFIT (E.B.I.T.D.A.)
OPERATING PROFIT $ - $ - $ - #DIV/0!
MARGIN (% OF R) ### ###
$ - #DIV/0!
$ - #DIV/0!
PROFIT BEFORE TAXES $ - $ - $ - #DIV/0!
Taxes as a % Profit Before $ - #DIV/0!
Taxes ### ###
Net Profit (or 'Net Income') $ - $ - $ - #DIV/0!
Shares 100,000 100,000 - 0%
Earnings Per Share ('E.P.S.') $ - $ - #DIV/0!
INCOME STATEMENT (Answer Sheet)
$ Change from % Change from
12/31/2015 12/31/2016 2015 to 2016 2015 to 2016
REVENUE $ 1,520,500 $ 1,400,000 $ (120,500) -8%
EXPENSES:
Cost of Good Sold ('C.O.G.S') $ 700,000 $ 800,000 $ 100,000 14%
GROSS PROFIT GROSS PROFIT MARGIN (% $ 820,500 $ 600,000 $ (220,500) -27%
OF REVENUE) ### ###
Sales and Marketing ('S&M') $ 120,000 $ 140,000 $ 20,000 17%
S&M as a % of Revenue 8% ###
Research and Development ('R&D') $ 60,000 $ 80,000 $ 20,000 33%
R&D as a % of Revenue 4% ###
General and Administrative ('G&A') $ 85,000 $ 105,000 $ 20,000 24%
G&A as a % of Revenue 6% ###
TOTAL OPERATING EXPENSES $ 265,000 $ 325,000 $ 60,000 23%
OPERATING PROFIT (E.B.I.T.D.A.)
OPERATING PROFIT $ 555,500 $ 275,000 $ (280,500) -50%
MARGIN (% OF R) ### ###
Interest $ 49,500 $ 59,500 $ 10,000 20%
Depreciation & Amortization $ 5,000 $ 5,000 $ - 0%
PROFIT BEFORE TAXES $ 501,000 $ 210,500 $ (290,500) -58%
Taxes Taxes as a % Profit Before $ 125,250 $ 52,625 $ (72,625) -58%
Taxes ### ###
Net Profit (or 'Net Income') $ 375,750 $ 157,875 $ (217,875) -58%
Shares 100,000 100,000 - 0%
Earnings Per Share ('E.P.S.') $ 3.76 $ 1.58 -58%
INCOME STATEMENT
$ Change from % Change from
12/31/2014 12/31/2015 2014 to 2015 2014 to 2015
REVENUE $ 1,100,000 $ 1,520,500 $ 420,500 38%
EXPENSES:
Cost of Good Sold ('C.O.G.S') $ 600,000 $ 700,000 $ 100,000 17%
GROSS PROFIT $ 500,000 $ 820,500 $ 320,500 64%
Sales and Marketing ('S&M') $ 100,000 $ 120,000 $ 20,000 20%
Research and Development ('R&D') $ 50,000 $ 60,000 $ 10,000 20%
General and Administrative ('G&A') $ 75,000 $ 85,000 $ 10,000 13%
TOTAL OPERATING EXPENSES $ 225,000 $ 265,000 $ 40,000 18%
OPERATING PROFIT (E.B.I.T.D.A.) $ 275,000 $ 555,500 $ 280,500 102%
Interest $ 55,000 $ 49,500 $ (5,500) -10%
Depreciation $ 5,000 $ 5,000 $ - 0%
Amortization $ 1,000 $ 1,000 $ - 0%
PROFIT BEFORE TAXES $ 214,000 $ 500,000 $ 286,000 134%
Taxes $ 53,500 $ 125,000 $ 71,500 134%
Net Profit (or 'Net Income') $ 160,500 $ 375,000 $ 214,500 134%
