5. Income statement Income statements illustrate what revenues the firm collects, the expenses required to support revenues, and the firm's profitability over a specified period of time. While balance sheets are a "snapshot" of the firm's status on a specific date, income statements reflect performance over a period of time. Publicly held companies generate income statements every quarter (three months) and for their annual report. $ INCOME STATEMENT (Thousands of dollars) Net revenues - Cost of goods sold - Operating expenses - Research & development expense Operating costs excluding depreciation - Depreciation and amortization expense Operating income (EBIT) - Interest expense Taxable income $ Yr 2 Income Statement 7,000 Roll your mouse over each income statement (2,781) account to learn about it. (1,809) (912) (5,502) (223) (1,275) (190) 1,085 (434) 651 (9) 642 $ $ - Taxes Net income - Preferred dividends Net income available to common shareholders $ Dividends Addition to retained earnings 321 321 in this example, the term pays nair or its earnings as dividenas to its stocknolders and retains the other nair. This is aone ror simplicity nere, but real firms weigh a multitude of factors in setting their dividends. This issue will be covered in your finance course. Check Your Understanding The gross margin for this fictional company is: 33.3% 18.2% 14.7% O 9.2% 60.3% If the firm has 200,000 common shares outstanding, its earnings per share (EPS) is while its dividends per share (DPS) is With its earnings, a firm has a decision to make about whether to pay common dividends or On the income statement, interest expense is preferred dividends are and common dividends are Wages are considered a(n) when it incurs them, because the future benefits that this spending is A company usually expenses expected to bring are very uncertain and difficult to time. Grade It Now Save & Continue Continue without saving