Returns Analysis The Income Statement profit loss statement

第九章 投資報酬分析—損益表 Returns Analysis : The Income Statement (profit & loss statement) 1

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The income statement provides a measure of return from the business or the ability to meet financial obligations during the year. The cash flow statement (chap. 10) supplements the income statement by showing the timing of receipts and expenses during the year. p. 168, Table 9. 1 • Receipts: Crop sales + livestock sales + government payments + miscellaneous income + increase in current inventory – livestock & feed purchased = gross income • Expenses: Operating & fixed expense Gross income – operating expense = net operating income Net operating income – fixed expense = net farm income 3

Receipts from the sales of assets are generally not considered as income. Capital expenditures to purchase fixed and working assets are excluded from expenses. net cash income = cash receipts – cash expense Net income net operating income net farm income Inventory adjustments are required to accurately determine gross income. Net cash income + current inventory – depreciation on intermediate and fixed assets = net farm income 4

P. 175, Table 9. 4 Income statement ratios Expense to income ratios: Operating ratio = total operating expense / gross income Fixed ratio = fixed expenses / gross income Gross ratio = total expense / gross income 5

Income to investment ratios: Capital turnover = gross income / average capital investment Rate of return on capital = return to total capital / average capital investment Rate of return on equity = return to equity / average net worth Return to total capital = net farm income + interest paid – allowance for operator and family labor and management Return to equity = net farm income – allowance for unpaid operator and family labor and management Management Return (Loss) = Net farm income – Operator & family labor – interest on equity capital 6