Income Statement

If SG&A is a consolidated, one-line item, the analyst must use discretion to select one of these methods to account for all the various expenses baked into that one line item. When a company is looking to cut costs, SG&A is often the focus in implementing cost controls.

However, salespeople work 40 hour weeks, so their salaries are paid regardless of sales level for a period. A cleaning business uses detergents, sponges and cloths to provide services, so the products consumed in a mo […]

Sometimes, other services such as internet, cable TV and phone services are considered to be additional utilities since they are now considered standard in most American households. The cost of utilities can vary significantly, mainly based on your location, local climate, your usage habits and the size of your home.

However, California and Oregon are both in the ten states with the cheapest utility bills, and Washington—the third West Coast state in the contiguous US—is in (more…) […]

However, as part of the American Rescue Plan Act of 2021, the government has waived all premiums from April 1 through Sept. 30 in 2021 for people who have lost a job or had their hours cut. Negotiating this accord can ease your transition to a new job, relieve stress, and possibly provide a nice financial cushion. However, a monetary arrangement isn’t the only topic to discuss in these discussions; you should also consider continuing insurance benefits, assistance in finding another job, […]

So, excluding depreciation and amortization can give business managers a comparison of their company’s performance with other companies in the same industry. EBIT is popular among analysts when analyzing a company that is less capital intensive, such as a tech firm. On the other hand, analysts prefer EBITDA when analyzing capital intensive sectors or firms that amortize the massive amounts of tangible assets, such as Real Estate and Aviation. If we use EBIT for such firms, then a large am […]

The earnings figure is listed as net income on the income statement. When investors and analysts speak of a company’s earnings, they’re talking about the company’s net income or the profit. As a bonus, analysts also like to see EPS numbers growing faster than revenue numbers because it indicates company management is increasing the efficiency with which it runs the company.
Is higher PE ratio (more…) […]

EBIT, or earnings before interest and taxes, is a measurement of a company’s profitability directly related to its sales. EBIT answers the question of whether a company makes a profit from selling its merchandise.

When you produce your financial statements each month and year, generate the EBIT balance. Compare the balance to past periods, and determine if the trend is increasing or decreasing. Compare your firm’s performance to other companies in your industry. Generally accepted […]

As you can see, the depreciation rate is multiplied by the asset book value every year to compute the deprecation expense. The expense is then added to the accumulated depreciation account. The double declining depreciation rate would equal 20 percent. Repeat the above steps for each year you plan to calculate depreciation. Instead of evaluating an asset’s value evenly from one year to the next, the double-declining depreciation method evaluates an asset’s value by doubling the amou […]

As previously mentioned, direct costs will always form part of a business’s cost of sales. Manufacturing overhead is typically incurred by businesses involved in the manufacturing of products. Businesses that do retail and/or wholesale typically won’t have manufacturing overhead. Indirect costs are often fixed expenses but they can also be variable expenses. Common examples include rent, the cost of utilities, salaries and wages of employees not directly involved (more…) […]

Operating profit, like gross profit and net profit, is a key financial metric used to determine the company’s worth for a potential buyout. The higher the operating profit as time goes by, the more effectively a company’s core business is being carried out.
The operating income formula is calculated by subtracting operating expenses, depreciation, and amortization (more…) […]

By eliminating the effect of interest and taxes, it shows the business’s underlying profitability regardless of the company’s capital structure or the tax jurisdiction where it operates. Business owners and managers can use EBIT to get a picture of their business’ competitiveness and its attractiveness to investors.

EBIT represents the approximate amount of operating income generated by a business. The EBIT acronym stands for Earnings Before Interest and Taxes; by removing in […]