Income Statement Powerpoint
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Transcript Income Statement Powerpoint
Income Statement
Divide Yourselves According to What
Your Are On An Income Statement.
► $2000.00 from sale of 4 calves
► $1000.00 Hay Bill
► $50.00 Vaccination Bill
► $600.00 from sale of cull cow
► $100.00 for rent on facilities.
► $5,000.00 crop sales
► $600.00 seed bill
► $1,000.00 fuel bill
► $1,666.00 rent for crop ground
► $2,000.00 for crop government
payment
What is an income statement?
An income statement is a list of incomes
and expenses in a business that determine
the profitability of a business. It allows an
operator to evaluate or analyze the
profitability of a business by utilizing
equations and ratios.
What is an income?
► Income
is money received from the sales of
services or products that a business
provides. This may include items such as
sales of crops, livestock, or even
government payments.
What is an expense?
►
An expense is money paid out to operate a
business. This may include items such as
fuel, hired labor, feed, seed, etc.
What is an adjustment?
► Some
adjustments have to be made in order
to give a clearer picture of the profitability
of a business. These adjustments are made
to incomes, expenses, and inventories.
These adjustments are made by taking
ending values on a balance sheet and
subtracting beginning values. This converts
a cash income statement to an accrual
income statement.
Operating Expense Ratio
Determines what percent of total income is
spent on operating expenses.
= Total expenses – depreciation and
interest/Total Income
Depreciation Expense Ratio
Determines what percent of total income is
spent on depreciation expenses.
= Depreciation/Total Income
Interest Expense Ratio
Determines what percent of total income is
spent on interest expenses.
= Cash Interest Paid + Change in Interest
Payable/Total Income
Net Farm Income From Operations
Ratio
Determines what percent of total income is
net farm income from operations.
= Net Farm Income From Operations/Total
Income
Return to Equity Capital and
Management Ratio
The portion of net farm income returned to
equity capital and management after
subtracting out operator and family allowance.
= Net Farm Income – Operator and family
allowance
Rate of Return on Farm Assets
Shows the percentage return on investment of the
business.
Must use several equations to get the Rate of Return
on Farm Assets.
►
►
►
Net Farm Income + Total Interest Expense = Return to
Unpaid Operator and Family Labor, Total Capital, and
Management
Return to Unpaid Operator and Family Labor, Total Capital,
and Management – Operator and Family Labor Allowance =
Return to Farm Assets.
Return to Farm Assets/Average Total Farm Assets x 100 =
Rate of Return on Farm Assets
Rate of Return On Farm Equity
Shows the percentage return on net worth.
= Return to Equity Capital and Management
(Shown in V.)/Average Farm Net Worth
Rate of Return on Borrowed Capital
The value calculated from this should be
compared with the average interest rate for
borrowed capital from a lending institution to
evaluate whether returns are great enough to
pay the cost of borrowing those funds.
Return on Farm Assets (VI, B, 2) – Return to
Equity Capital and Management (V)/Average
Total Farm Assets – Average Net Worth.
(Found by adding beginning and ending values
from balance sheet together and dividing by
2)
Operating Profit Margin Ratio
Defines profit as a percentage of total
revenue.
= Net Farm Income + Total Interest Expense
– Withdrawals for Operator and Family
Labor/Total Income