Profitability statement

Closing the Books At the end of the accounting period, the individual accounts are closed by balancing each in accordance with Eq. (9-126). The balances are transferred either to the balance sheet in the case of capital expenditure or to the income statement in the case of revenue expenditure. An alternative name for the balance sheet is the position statement the income statement is also caUed the trading and profit-and-loss account. 

An income statement such as the one shown in Table 9-16 is used to obtain the profit or loss for a given period. The debit and credit balances of all the accounts that do not represent expenditure or income for a given accounting period are entered as assets and liabilities in a balance sheet such as that shown in Table 9-17. 

Let us consider plant eqmpment costing I million and purchased on Jan. I, 1988. T le 9-18 ows the provision for the depreciation account for 1988, 1989, and 1990 for straight-line depreciation, assuming a service hfe of 10 years and zero scrap value. The credit entries of 100,000 for the depreciation in each year are balanced by the depreciation charge of 100,000 debited to the income statement (or trading and profit-and-loss account) in each year. Table 9-19 shows the corre-... 

One of the most important items in an income statement is depreciation expense. Although depreciation should not be thought of as a means to build up a fund to replace plant, it nevertheless does enable money to be retained in the business by reducing the profit available for distribution to stockholders. It is of course a duty of both accountants and management to see that sufficient money is retained in the business to replace assets and to invest such money in other processes or outside investment. 

An income statement or profit-and-loss account gives the net annual profit A vp before tax. In order to assess the annual cash income Ac, as a source of funds from the value of the net annual profit A vp given in the income statement, it is necessary to add back all noncash expenses such as the balance-sheet annual depreciation charge Abd-This practice sometimes erroneously suggests that depreciation is a source of funds, whereas cash income is the only source of funds. 

After the balance sheet and the income statement or profit-and-loss account, the funds statement is generally regarded as the most important financial document. However, many financial managers regard a statement showing changes in cash as being of equal importance. 

The Duns Financial Records Plus (DFR) database provides a balance sheet, income statement, and fourteen of the more widely used business ratios for measuring solvency, efficiency, and profitability. DFR also provides industiy norms and percentages that can be used to compare a toller s financial position to that of their... 

Until recently, middle and corporate level management have ignored the impact of the maintenance operation on product quality, production costs and more importantly on bottom-line profit. The general opinion has been Maintenance is a necessary evil or Nothing can be done to improve maintenance costs . Perhaps these were true statements ten or twenty years ago. 

Throughout this book reviews have been made on products that literally are used in many different markets. This action fits the usual statement that this is the World of Plastics Important with all the cost analysis is that profits have to be included. Influencing factors that involve profits are summarized in Figs. 9-10 to 9-13. The life-history curve, Fig. 9-11, shows the basic format of a typical product cycle for an infinite number of products. It is also called a bathtub curve. 

The most interesting and important use of internal standards is to compensate absorption and enhancement effects the Class I deviations of Section 7.8. A discussion of this function of an internal standard can be profitably begun by considering two statements (1) An internal standard is fully satisfactory when the intensity ratio obeys the relation... 

The EVA [10,11] combines information from the profit and loss statement (revenue, costs, earnings before interests and taxes (EBIT), etc.) and the financial sheet (net working capital (NWC), assets, etc.). The EVA is the interest calculation in absolute measurements and strongly related to the return on capital employed (ROCE) where the gained interest rate is calculated (Figure 1.7). In the long term, this interest rate should be above the capital costs of the company which is the interest rate the company has to pay for a credit on the capital market. Hence, a positive EVA means that the company has earned some money above the capital costs. 

Two valuable sources of data for identifying opportunities for optimization include (1) profit and loss statements for the plant or the unit and (2) the periodic operating records for the plant. The profit and loss statement contains much valuable information on sales, prices, manufacturing costs, and profits, and the operating records present information on material and energy balances, unit efficiencies, production levels, and feedstock usage. 

The formulation of objective functions is one of the crucial steps in the application of optimization to a practical problem. As discussed in Chapter 1, you must be able to translate a verbal statement or concept of the desired objective into mathematical terms. In the chemical industries, the objective function often is expressed in units of currency (e.g., U.S. dollars) because the goal of the enterprise is to minimize costs or maximize profits subject to a variety of constraints. In other cases the problem to be solved is the maximization of the yield of a component in a reactor, or minimization of the use of utilities in a heat exchanger network, or minimization of the volume of a packed column, or minimizing the differences between a model and some data, and so on. Keep in mind that when formulating the mathematical statement of the objective, functions that are more complex or more nonlinear are more difficult to solve in optimization. Fortunately, modem optimization software has improved to the point that problems involving many highly nonlinear functions can be solved. 

The ability to understand and apply the concepts of cost analysis, profitability analysis, budgets, income-and-expense statements, and balance sheets are key skills that may be valuable. This section treats two major components of economic... 

In order to determine the values of Fa,Fb, and Fc that maximize the daily profit, prepare a mathematical statement of this problem as a linear programming problem. Do not solve it. 

Next, Figure B.9 represents a simplified cash flow statement for a retail computer store. The bottom number in the statement does not represent profit (income, earnings)—just the net of the cash flows, because the 30,000 mortgage payment... 

The third statement shown in Figure B. 10 is for income and expense that leads to net after-tax profits (earnings), a quantity that transfers to the balance sheet periodically in the category called equity. 

Value Planning-, detailing the requirements to plan monthly values consistent to the company profit and loss statement... 

Focus on supply volume planning to fulfil given demand, reach a feasible plan and minimize supply costs also using subjective penalties instead of actual cost parameters from controlling future-oriented profit-maximization according to profit and loss statement and inventory value planning not covered so far... 

R2 Profit planning according to profit loss statement 3... 

Value planning described in subchapter 5.3 consolidates all values in a consistent profit and loss statement view and maximizes global profit. In addition, value planning addresses the requirements of planning future inventory values across the value chain network. 

Altogether, the model supports the company to optimize monthly profits based on volume decisions consistent as far as possible to company s profit and loss structures. Ideally, it is fully consistent with the company s profit and loss statement requiring integrating costs for support areas such as further overhead costs or capital costs on receivables. This would be a long-term vision, where further research should be directed to. 

Global profit optimization consistent with profit and loss statements demonstrates how to integrate the value and volume views in controlling, sales marketing, supply chain management, production and procurement. 

N.N. (2006a) Income statement. Wikipedia, The Free Encyclopedia. URL http //en.wikipedia.org/wiki/Profit and loss statement, Date 24.07.2006 N.N. (2006b) Economic Value Added. Wikipedia, The Free Encyclopedia. URL http //de.wikipedia.org/wiki/Economic Value Added, Date 27.07.2006 N.N. (2006c) Marksituation. Wikipedia, Die freie Enzyklopadie. URL ... 

The first main purpose of this book is to formalize the role of aggregate demand as a constraint on expanded reproduction. I will develop an analytical model which explores the conditions under which profits can be realized in the reproduction schema. This approach is in keeping with the spirit of Dillard s (1984 425) statement that Marx s economics would be strengthened by a more formal treatment of the theory of effective demand. ... 

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Benjamin franklin once said Drive thy business or it will drive thee. This statement is true for any business in any industry and it is vital to understanding the concept of business growth. No business wants to go stale or get into a rut. Executives want to continually drive business growth, optimize profits, and ultimately be the best. 

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