If you are planning to invest in the stock market, then you need to understand the basic financial terminologies, such as multi-step and single-step income statements, balance sheet, statement of cash flow, etc. This will help you make some smart investments.
Every company maintains it’s income statement. It is basically a financial statement of the company, that documents the overall performance of the company in terms of profits and expenditure over a specific accounting period.
The income statement includes the financial performance of the company, that shows the impact of operating and non-operating activities on the revenues and expenses of the company. Different companies have different accounting periods, generally a fiscal quarter or a fiscal year is considered as a standard accounting period.
Multi-Step Income Statement
An income statement can be maintained in two types, multi-step statement and single step statement. The single-step income statement shows the total revenue and total expenditure of the company, whereas, the multi-step statement maintains a separate account of operational revenue and operational expenditure from non-operating revenues, non-operating expenditure, other profits, and losses.
Unlike a single step statement, multiple step statement includes many subtractions while calculating the net income of the company. The systematic mathematical breakdown also gives a detailed idea about various areas of business which need more attention, such as income tax, internal revenue service, or cash flow, etc.
A multi-step statement sample of the company can help you understand it’s transactions in detail, so that you can think whether or not you want to invest in that company. The multi-step statement contains the gross profit or net income of the company. You can compare gross profit to the last year’s gross profit, or to other companies in the same industry for a better idea.
A company with increasing growth rate can be ideal for your investments. The operational income of the company is also mentioned in the statement, that indicates the profit gained by company through its primary activities, such as buying and selling goods or services. The net income in the statement is labeled as positive or negative. If the amount is negative, it indicates the net loss and if the amount is positive, it indicates net profit. In the conflict between multi-step vs single step, the later one always loses, as it does not give elaborate information.
Multi-Step Income Statement Template
Here is the multi step income statement template, that gives you an idea about how to prepare a multi-step statement.
|Sample Multiple Step Income Statement
|Particulars||Amount ($)||Amount ($)|
|Sales Return and Allowances|
|Cost of Goods Sold|
|Goods Manufactured and Purchased|
|Total Goods Available|
|Total Goods Sold|
|Gross Profit = [Net Sales – Cost of Goods Sold]|
|Furniture and Equipment|
|Web Hosting and Domains|
|Travel and Utilities|
|Research and Development|
|Salaries and Wages|
|Operating Income = [Gross Profit – Operating Expenses]|
|Non Operating Income|
|Non Operating Revenues|
|Non Operating Expenses|
|Non Operating Losses|
|Non Operating Gains|
|Income from Discontinued Operations|
|Net Income = [Operating Income + Non Operating Income]|
The news about corporate bankruptcy, frauds in investment companies or banks has become a common thing these days, be it Satyam or Lehman brothers. In such a doubtful scenario, it is wise to know some common and primary terms associated with business and corporate world. Now though you have a fair idea about this topic, consult your investment advisors to know the nuances of business and commerce. After all it is about our hard-earned money, on which the present and future of our families depend.