Engineering Economy. Engineering Economy, Engineering, Economy, Business and Economy, Business, Economics, Finance, Accounting,

1. 2. Income Statement

2. Income Statement: Concepts
1. Revenue/ Sales = Income from Sales
2. Cost of Revenue = Manufacturing Cost (Labor/
Material/ Overhead cost)
3. Gross Profit/ Margin (Operating Income) =
Revenue/Sales – Cost of Revenue
4. Operating Expenses = Sales/ marketing/ administrative
expenses
5. Operating Profit/ Margin (Operating Income Before
Taxes) = Gross Profit (Operating Income) – Operating
Expenses
6. Income before taxes = Operating Profit – Interest
7. Net Income/ Profit/ Margin = Income before taxes-
Taxes

3. Illustration of Income Statement

4. Earnings per Share (EPS)

5. 3. Retained Earnings Statement
The statement that shows/reports how much of the
firm’s earnings were retained in the business rather
than paid out as dividends is called “Statement of
Retained Earnings”.
The figure for retained earnings that appears in this
statement is the sum of the annual retained earnings
for each year of the firm’s history.

6. Retained Earnings

7. Dividend
The term dividend means distribution of cash by a
corporation to its stockholders.
The amount received by each stockholder is in
proportion to the number of shares owned.
Dividends are paid only through action by the board
of directors.

8. Illustration Question
The financial details of a company for the year 2011 are as
follows.
Net income (Million SAR) = 572
Preferred Stock Dividends (Million SAR) = 270
Common Stock Dividends (Million SAR) = 150
Number of shares of Outstanding Commons stocks= 1 Million
Calculate the Retained Earnings and Earning Per Share.
The financial details of a company for the year 2011 are as
follows.
Net income (Million SAR) = 572
Preferred Stock Dividends (Million SAR) = 270
Common Stock Dividends (Million SAR) = 150
Number of shares of Outstanding Commons stocks= 1 Million
Calculate the Retained Earnings and Earning Per Share.

9. Answer to the Question
Retained Earnings = (Net Income) – (Preferred
& Common Stock Dividends)
= 572 – (270 + 150)
= 572 – 420 = SAR 152 Million
EPS = Available Earnings to Common Stockholders
Number of Shares of Common Stock Outstanding
= 150 = SAR 150
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Retained Earnings = (Net Income) – (Preferred
& Common Stock Dividends)
= 572 – (270 + 150)
= 572 – 420 = SAR 152 Million
EPS = Available Earnings to Common Stockholders
Number of Shares of Common Stock Outstanding
= 150 = SAR 150
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10. Answer to the Question
Retained Earnings = (Net Income) – (Preferred
& Common Stock Dividends)
= 572 – (270 + 150)
= 572 – 420 = SAR 152 Million
EPS = Available Earnings to Common Stockholders
Number of Shares of Common Stock Outstanding
= 150 = SAR 150
1
Retained Earnings = (Net Income) – (Preferred
& Common Stock Dividends)
= 572 – (270 + 150)
= 572 – 420 = SAR 152 Million
EPS = Available Earnings to Common Stockholders
Number of Shares of Common Stock Outstanding
= 150 = SAR 150
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