Put the following variables in order from the top(1) to the bottom(7) according to how they appear on the income statement.

Independently, it is important to know what these financial measures represent. Be sure to take time to learn the items on the Income Statement

- 1. 2. 3. 4. 5. 6. 7.

Net Income- Bottom line "Earnings" for the firm. Owners and shareholders are paid from this value and it connects to the statement of cash flows and statement of stockhodlers' equity

- 1. 2. 3. 4. 5. 6. 7.

Interest Expense- When a firm has borrowed, there are interest payments on their financed debt. This value is largely derived from long-term debt where the interest expense increases as a firm takes out more debt. It is also related to Notes Payable.

Notice that this is subtracted before taxes are calculated, which is important to remember when we get to Chapter 10 (don't worry I will remind you of this observation in that chapter)

- 1. 2. 3. 4. 5. 6. 7.

Taxes- In this chapter, you will be given either the firm's tax rate, or the tax amount. Know how to use both methods

- 1. 2. 3. 4. 5. 6. 7.

Revenue- also called Sales- this is the top line of the income statement

- 1. 2. 3. 4. 5. 6. 7.

Depreciation Expense- or depreciation- this represents the expense of using equipment in terms of its decrease in value. For example, as I use a truck for my business, this will decrease the value of the truck over time (as I put on miles and it ages, etc). This expense is estimated in accounting.

- 1. 2. 3. 4. 5. 6. 7.

Operating Expenses- or Operating Costs- Total Operating Expenses- this represent two combined items: the Cost of Goods Sold and Other Operating Expenses. This item is related to costs from the firm's operations.

- 1. 2. 3. 4. 5. 6. 7.

EBIT- Earnings before Interest and Taxes, also called Operating Income. EBIT represents a firm's earnings from operations. This is an important variable that we will use a lot. Take a minute to make sure you know the three variables you need to find EBIT.