Financial Statements & Ratios
Income Statement
The income statement reflects the ability of management to generate sales, produce a reasonable margin on those sales, control expenses and earn an equitable profit. Thus, it serves as the primary scorecard of management’s effectiveness. The level of performance depends primarily upon control of two areas: Gross Margin The first measure of profitability, gross margin, considers all expenses related to the cost of buying and pricing the products sold. To be successful a business must earn enough gross margin to cover all of the other business expenses and earn a reasonable profit as well. Operating Expenses Operating expenses are difficult to control, particularly for the smaller store. Expense management is frequently referred to as a survival issue—poor expense management may jeopardize the business’ future.
Conven-
Contractor
ience
Core
Super
Home Center
Oriented
Hardware
Hardware
Hardware
Supply
Typical Sales Volume ($)
1,869,036
2,723,613
4,625,571
5,606,107
6,447,582
Income Statement (% of sales)
Net Sales
100.0
100.0
100.0
100.0
100.0
Cost Of Goods Sold
60.3 39.7
60.1 39.9
60.8 39.2
67.7 32.3
71.0 29.0
Gross Margin Before Patronage Dividend
Patronage Dividend
1.5
1.3
1.1
1.1
0.3
Gross Margin
41.2
41.2
40.3
33.4
29.3
Payroll Expenses Owners/Officers Salaries & Bonuses All Other Employee Wages & Bonuses Total Salaries, Wages & Bonuses Payroll Taxes (FICA, Workers’ Comp., Unemp.) Group Insurance (Hospital/Medical/Life) Benefit Plans (Pension, Profit Sharing, etc.)
4.5
3.5
2.1
3.4
2.9 9.8
12.6 17.1
12.4 15.9
12.2 14.3
11.0 14.4
12.7
1.5 0.6 0.2
1.3 0.5 0.2
1.3 0.6 0.2
1.3 0.9 0.2
1.2 0.3 0.4
Total Payroll Expenses
19.4
17.9
16.4
16.8
14.6
Occupancy Expenses Utilities (Heat, Light, Power, Water) Building Repairs & Maintenance Rent Or Ownership In Real Estate*
0.8 0.3 3.6 4.7 1.2 0.4 1.0 0.2 0.2 0.5 0.0 7.4
0.7 0.3 3.6 4.6 1.6 0.3 0.6 0.2 0.1 0.5 0.0 6.8
0.8 0.3 3.9 5.0 1.6 0.2 0.4 0.2 0.1 0.6 0.0 6.8 9.9
0.6 0.4 1.1 2.1 0.7 0.2 0.6 0.1 0.1 1.2 0.0 4.8 7.7
0.3 0.4 0.8 1.5 0.3 0.2 0.7 0.0 0.1 0.6 0.2 5.8 7.9
Total Occupancy Expenses
Other Operating Expenses Advertising & Promotion
Telephone
Insurance (Business Liability & Casualty)
Interest Expense
Taxes (Personal Prop., Use, Licenses, Permits)
Depreciation
Bad Debt Losses
All Other Operating Expenses Total Other Operating Expenses
10.9
10.2
Total Operating Expenses
35.0
32.7
31.3
26.6
24.0
Operating Profit
6.2 1.1 7.3
8.5 1.1 9.6
9.0 1.4
6.8 1.6 8.4
5.3 1.0 6.3
Other Income/Expenses
Profit Before Taxes
10.4
Owners' Discretionary Profit
11.8
13.1
12.5
11.8
9.2
*includes rent, mortgage interest, building depreciation, real estate insurance and real estate taxes
9
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