Income Statement Basics

Income statements are specific to a defined period of time and reflect a business’ revenues (sales) and expenses, demonstrating how revenues can be transformed into net profit. If you’re an AgWest customer, or considering becoming one, we’d be glad to meet with you to review your income statements.

Why should I prepare income statements?

Understanding your net income positions you to make informed decisions about the direction of your business. With an income statement in hand, you’re also better prepared to answer questions such as:

• Do I have sufficient earnings to cover unexpected increases in input costs? 
• Are my earnings sufficient to fund the next opportunity for growth? 
• How much debt can the business afford given earnings and repayment capacity? 
• Can I afford to purchase new equipment now? 

What types of financial information are included in a balance sheet?

• Income (revenue and sales) 
• Variable expenses 
• Gross profit and margin 
• Fixed expenses 
• Net profit and margin