Agriculture Reference
In-Depth Information
Transportation
Advertising and promotion
Administrative expenses, including:
Auditing fees
Directors' fees
Management salary
Offi ce expenses
Travel expenses
General expenses (overhead), including:
Depreciation
Insurance
Taxes
Rent
Repairs
Utilities
(Manufacturing costs, where incurred, are included in cost of goods sold.)
In BF&G's income statement, the various expense categories are simply listed (e through
u). The returns and allowances have already been excluded. Net sales for the year ending
December 31 were $13,410,000. This detailed listing of operating expenses in the above
categories will make the analysis and interpretation of this valuable fi nancial information
much easier for BF&G management.
Net operating income (w)
Also called the net operating margin, the
net operating income
is the amount left over when
total operating expenses (v) are subtracted from the gross margin or gross profi t (c). The net
operating income is affected by the same factors that infl uence gross margins, plus the
factors associated with business operating expenses.
Net income before taxes (z)
Net income (profi t) before taxes
is the amount that remains after taking into account any
non-operating revenue or expenses. Non-operating revenue would include any revenue
derived from other sources, such as interest or dividends earned on outside investments (x).
Local cooperatives may include patronage refunds from their regional cooperative in other
revenue. BF&G generated $18,200 in other non-operating revenue from interest on invest-
ments and the sale of some very old equipment. On the other hand, BF&G incurred interest
expenses of $230,840 (y). This $230,840 is interest on money that BF&G had borrowed
from various sources (as they appeared on the balance sheet), and so is not directly a part of
the operation.
Net income after taxes (bb)
Net income (profi t) after taxes
, or net profi t as it is sometimes called, simply takes into
account the federal business profi ts tax (aa). The rate of tax depends on many factors, includ-
ing the size of the profi ts, profi t levels in previous years, type of business organization, and
several complicated tax regulations. In larger corporate organizations, tax rates often reach
nearly 40 percent of the profi ts. In the case of proprietorships and partnerships, federal profi t
