What Companies Live and Die for, or the Income Statement.

Originally Posted on 3/25/2010 

One of the most common user's question is "How much am I earning?"
This question is second only to "How much am I selling?".
Often projects start just to have an efficient reply to these two questions.

Notice that the two questions are only superficially similar but an ocean lays in the middle . I'm sure you've been asked many times to create sales reports. They're important, but they describe only a fraction of reality. A company general manager is much more interested in different figures, that is the money left after paying what must be paid and collecting the credit.
As you probably know, the broad definition of this figure is: Sales - Cost = Income Reports usually do not have one row (albeit some widgets from famous BI players provide exactly one row of data), but are drawn in the form of the income statement. A traditional income statement, for a commercial company, may look like this:

Typical P&L for a commercial company

Typical P&L for a commercial company

An income statement like this depicts company business in little detail. It's ok, more or less, for Wall Street financial analysts and it says that, yes, somehow, in 2009 you should end up with more money than in 2008; but does not tell so much about how actually running the business. In the next chapter we'll see what a chameleon the Income Statement is.


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