The income statement summarizes the income and outgo of funds for the
entire year. It reflects the ability of management to make sales, control
expenses, and thereby earn profit. The income statement serves as a report
card for management's performance over the year. The level of performance
depends primarily upon control of two areas: gross margin and operating
expenses.
Gross margin, the first measure of profitability, considers all expenses
related to the cost of buying and pricing the products sold. To be successful
a company must earn enough gross margin to cover all of the other business
expenses and earn a reasonable profit as well.
Operating expenses are difficult to control, particularly for the smaller
firm. Expense management is frequently referred to as a survival issue
-- poor expense management may jeopardize the company's future.
| |
Typical
Hardware |
Typical
Home
Center |
Typical
Lumber
Outlet |
Number Of Firms Reporting
Typical Sales Volume
Sales Growth (1996 vs. 1995) |
563
$978,827
4.1% |
99
$3,173,990
5.7% |
146
$2,558,754
6.9% |
| Income Statement |
|
|
|
| Net Sales |
100% |
100% |
100% |
| Cost Of Goods Sold |
63.7 |
69.9 |
75.5 |
| Gross Margin before Rebates or Dividends |
36.3 |
30.1 |
24.5 |
| Purchase Rebates or Patronage Dividends |
1.2 |
0.6 |
0.1 |
| Gross Margin after Rebates or Dividends |
37.5 |
30.7 |
24.6 |
| Payroll Expenses |
|
|
|
| Owners/Officers Salaries & Bonuses |
4.8 |
3.0 |
2.9 |
| All Other Employee Salaries, Wages & Bonuses |
12.9 |
11.5 |
9.4 |
| Total Salaries, Wages & Bonuses |
17.7 |
14.5 |
12.3 |
| Payroll Taxes, FICA, Workers Comp & Unempl. |
1.6 |
1.4 |
1.2 |
| Group Insurance (Hospital/Medial/Life) |
0.9 |
0.8 |
0.7 |
| Benefit Plans (Pension, Profit Sharing, etc.) |
0.0 |
0.2 |
0.0 |
| Total Payroll Expenses |
20.2 |
16.9 |
14.2 |
| Occupancy Expenses |
|
|
|
| Utilities: Heat, Light, Power, Water |
1.1 |
0.7 |
0.5 |
| Building Repairs & Maintenance |
0.3 |
0.3 |
0.3 |
| Rent or Ownership in Real Estate |
3.6 |
2.2 |
1.1 |
| Total Occupancy Expenses |
5.0 |
3.2 |
1.8 |
| Other Operating Expenses |
|
|
|
| Advertising and Promotion |
2.4 |
1.4 |
0.7 |
| Telephone |
0.4 |
0.3 |
0.3 |
| Insurance (Business Liability & Casualty) |
0.8 |
0.7 |
0.6 |
| Interest Expense |
1.3 |
1.2 |
0.8 |
| Taxes |
0.2 |
0.1 |
0.2 |
| Depreciation |
1.1 |
1.2 |
0.9 |
| Bad Debt Losses |
0.1 |
0.1 |
0.2 |
| All Other Operating Expenses |
4.3 |
4.1 |
3.5 |
| Total Other Operating Expenses |
10.6 |
9.1 |
7.2 |
| Total Operating Expenses |
35.8 |
29.2 |
23.2 |
| Operating Profit |
1.7 |
1.5 |
1.4 |
| Other Income/Expense |
0.6 |
0.7 |
0.8 |
| Profit Before Taxes |
2.3% |
2.2% |
2.2% |
