Net sales (revenue)
– Cost of goods sold
= Gross profit
– SG&A expenses (combined costs of operating the company)
– Depreciation & amortization
= EBIT (Operational Income)– Interest expense (cost of borrowing money)
– Tax expense
Bu aşamadan sonra sırasıyla finansman ve vergi giderlerinin çıkartılması ile iş biriminizin net karlılığı ortaya çıkacaktır.
1- Net Sales (revenue) Net sales = Gross sales – (Customer Discounts, Returns, Allowances)
2- Cost of Goods sold Jane owns a business that reselss machines. At the start of 2009, she has no machines or parts on hand.
She buys machines A and B for 10 each, and later buys machines C and D for 12 each.
All the machines are the same, but they have serial numbers.
Jane sells machines A and C for 20 each. Her cost of goods sold depends on her inventory method.
Under specific identification, the cost of goods sold is 10 + 12, the particular costs of machines A and C.
If she uses FIFO, her costs are 20 (10+10).
If she uses average cost, her costs are 22 ( (10+10+12+12)/4 x 2).
If she uses LIFO, her costs are 24 (12+12).
Thus, her profit for accounting and tax purposes may be 20, 18, or 16, depending on her inventory method. After the sales, her inventory values are either 20, 22 or 24.
Cost of Goods Sold —- Profit ——
Sales FIFO Avg. LIFO FIFO Avg. LIFO
40 20 22 24 20 18 16
3- Gross Profit
4- SG&A expenses (combined costs of operating the company)
Selling: Cost of Sales, which includes salaries, advertising expenses, rent, and all expenses and taxes directly related to producing and selling product
General: General operating expenses and taxes that are directly related to the general operation of the company, but don’t relate to the other two categories.
Administration: Executive salaries and general support and all associated taxes related to the overall administration of the company
5- EBITDA Earnings before interest, taxes, depreciation and amortization
The EBITDA of a company gives an indication of the current operational profitability of the business, i.e. how much profit does it make with its present assets and its operations on the products it produces and sells. A negative EBITDA indicates that a business has fundamental problems with profitability. A positive EBITDA, on the other hand, does not necessarily mean that the business generates cash. This is because EBITDA ignores changes in Working Capital (usually needed when growing a business), capital expenditures (needed to replace assets that have broken down), taxes, and interest.
6- Depreciation & amortization
Depreciation: Depreciation is the gradual decrease in the economic value of the capital stock of a firm, nation or other entity, either through physical depreciation, obsolescence or changes in the demand for the services of the capital in question. For example, a vehicle that depreciates over 5 years is purchased at a cost of $17,000, and will have a salvage value of $2000. Then this vehicle will depreciate at $3,000 per year, i.e. (17-2)/5 = 3.
Suppose a business has an asset with $1,000 original cost, $100 salvage value, and 5 years of useful life. First, the straight-line depreciation rate would be 1/5, i.e. 20% per year. Under the double-declining-balance method, double that rate, i.e. 40% depreciation rate would be used.
Amortization (or amortisation) is the process of decreasing, or accounting for, an amount over a period. The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo-French amorteser, alteration of amortir, from Vulgar Latin admortire to kill, from Latin ad- + mort-, mors death.
1. The paying off of debt in regular installments over a period of time
2. The deduction of capital expenses over a specific period of time (ususally over the asset’s life). More specifically, this method measures the consumption of the value of intangible assets, such as a patent or a copyright.
7- EBIT In accounting and finance, earnings before interest and taxes (EBIT), also called operating profit or operating income is a measure of a firm’s profit that excludes interest and income tax expenses.
EBIT = Revenue – Operating expenses (OPEX) + Non-operating income
Operating income = Revenue – Operating expenses
8. Interest expense (cost of borrowing money) Interest expense relates to the cost of borrowing money. It is the price that a lender charges a borrower for the use of the lender’s money. Interest expense is different from operating expense and CAPEX, for it relates to the capital structure of a company. Interest expense is usually tax-deductible.
9.EBT Earnings before taxes is the money retained by the firm before deducting the money to be paid for taxes. E.B.T includes the money paid for interest. Thus, it can be calculated by subtracting the interest from EBIT (Earnings Before Interest and Taxes).
11.Net income (EAT)
12. Net income (east)