Compare revenues and expenses

Oct 13, 2025 by thesweetdesigns.com 27 views

Business Income and Expenses Analysis

Understanding the Financial Statement

The provided financial statement appears to be a simple income statement, showcasing the income and expenses of a business. The statement includes the following information:

CrealrCatr: This is likely a cost or expense incurred by the business, amounting to $30.75.
Cell Phone: This is another expense, totaling $103.89.
Net Income: This is the remaining amount after subtracting the expenses from the total income, which is $237.91.

Analyzing the Financial Statement

To determine whether James can afford the expenses, we need to consider the net income of the business. The net income is the amount left after deducting all expenses from the total income.

Calculating the Affordability of Expenses

Let's calculate the affordability of the expenses by comparing the net income to the total expenses.

Total expenses: $30.75 (CrealrCatr) + $103.89 (Cell Phone) = $134.64
Net income: $237.91

Since the net income ($237.91) is greater than the total expenses ($134.64), James can afford the expenses.

Conclusion

Based on the financial statement, James can afford the expenses of $134.64, as the net income of $237.91 is sufficient to cover these costs.

Final Answer

The best answer is a. James can.
Business Income and Expenses Analysis: A Q&A Guide

Understanding the Financial Statement

In our previous article, we analyzed a simple income statement and determined that James can afford the expenses of $134.64. However, there are many more questions that arise when it comes to business income and expenses analysis. In this article, we will answer some of the most frequently asked questions related to this topic.

Q&A Session

Q1: What is the purpose of an income statement?

A1: The primary purpose of an income statement is to provide a snapshot of a company's financial performance over a specific period of time. It shows the company's revenues, expenses, and net income, which helps stakeholders understand the company's financial health.

Q2: What are the key components of an income statement?

A2: The key components of an income statement include:

Revenues: The income earned by the company from its sales, services, or other sources.
Cost of Goods Sold (COGS): The direct costs associated with producing and selling the company's products or services.
Gross Profit: The difference between revenues and COGS.
Operating Expenses: The indirect costs associated with running the business, such as salaries, rent, and utilities.
Net Income: The remaining amount after deducting operating expenses from gross profit.

Q3: How do I calculate net income?

A3: To calculate net income, you need to subtract the total operating expenses from the gross profit. The formula is:

Net Income = Gross Profit - Operating Expenses

Q4: What is the difference between gross profit and net income?

A4: Gross profit is the difference between revenues and COGS, while net income is the remaining amount after deducting operating expenses from gross profit. In other words, gross profit is the profit before operating expenses, while net income is the profit after operating expenses.

Q5: How do I analyze my company's financial performance using an income statement?

A5: To analyze your company's financial performance using an income statement, you need to:

Compare revenues and expenses: Compare the company's revenues and expenses to identify areas of improvement.
Analyze gross profit and net income: Analyze the company's gross profit and net income to determine the profitability of the business.
Identify trends: Identify trends in the company's financial performance over time to make informed decisions.

Q6: What are some common mistakes to avoid when analyzing an income statement?

A6: Some common mistakes to avoid when analyzing an income statement include:

Not considering non-cash items: Not considering non-cash items, such as depreciation and amortization, can lead to inaccurate financial analysis.
Not adjusting for seasonality: Not adjusting for seasonality can lead to inaccurate financial analysis, especially for businesses with fluctuating revenues.
Not considering industry benchmarks: Not considering industry benchmarks can lead to inaccurate financial analysis, as companies may not be performing as well as their peers.

Conclusion

Analyzing an income statement is a crucial step in understanding a company's financial performance. By answering these frequently asked questions, we hope to have provided you with a better understanding of the key components of an income statement and how to analyze it effectively.

Final Tips

Regularly review your income statement: Regularly review your income statement to identify areas of improvement and make informed decisions.
Consider industry benchmarks: Consider industry benchmarks to ensure your company is performing as well as its peers.
Seek professional advice: Seek professional advice if you are unsure about how to analyze your income statement or make informed decisions.

Understanding the Balance Sheet: A Guide for Business Owners
The Importance of Cash Flow Management in Business
How to Create a Budget for Your Business

Share Your Thoughts

Do you have any questions or comments about analyzing an income statement? Share your thoughts in the comments section below!