Financial Effects and Constraints

According to Hermanson, R., Maher, M., & Edwards, J. by definition an income statement “is a financial statement that shows cases a companies’ profitability during a set period”. How that profitability is measure is by comparing the revenues earned with the expenses incurred to produce these revenues. If the production of these revenues exceed the expenses that they incurred than the company has gained a net income and if the expenses incur were to exceed the revenue than the company has suffered a net loss.

The income statement shows a true and fair view of the company profit or loss for its financial year

The income statement is one of three financial statements that stock investors need to become familiar with (the other two are balance sheet and cash flow statement) (Loth, 2017). The income statement is created of four sections: sales or revenue, cost of goods or services sold, expenses, and net profit/loses. “Sales/revenues is how much revenue the company brought in by selling its products or services. Cost of goods/services sold is how much the company spent to purchase or produce the products or services it sold. Expenses is how much the company spent to keep the doors of the business open. Essentially, this includes all expenses except those spent specifically on the cost of goods or services sold. Net Profit or Loss: the "bottom line" that tells whether the company made a profit or operated at a loss” (Epstein,2014). This might lead you to the question of what the purpose of the income statement is? Once you understand the income statement you will understand how well a company is doing or not doing. In this paper, it will analyze the income statement of Ford Motor company from December 2010-2012.

This is a case study that used time studies and cost analysis to evaluate the effectiveness of prescribing medication in two U.S. hospital pharmacies. Hospital A had 450 inpatient licensed beds with 430,000 outpatient visits and used manual copies for prescribing medications. Hospital B had 250 licensed inpatient beds with 141,000 outpatient beds and used digital scanning for prescribing medications. For a two week period, both facilities pharmacies were monitored from order sent to the pharmacy to the time to the nurse’s station. By analyzing the data found and altering the technology utilized in the pharmacies, the order entry process in these facilities improved the turnaround time and cost spent during the medication distribution process. In using the systematic approach of lean methodologies, it identified the delays in the medication distribution system and further avoided medication errors which are major patient safety issues for every hospital. Applying these methods for problem-solving reduced the time required for pharmacists and nurses. Thus allowing more time to concentrate and productive in their tasks and preserving the value of the pharmacy and opening up opportunities for them to create more value for the customer. As the number of prescriptions

Throughout the entirety of the paper I will discuss the purposes of the income statement and the balance sheet; while also identifying the major types of expenses shown on the income statement, and listing major types of assets inside the typical balance sheet. I will also discuss the three different accounts that comprise the owner’s equity on a corporate balance sheet and the three categories of ratios that a business may use in an analysis of its financial statements. Lastly I will explain a statement of cash flows and describe the three standard sections contained in cash flow statements. Since I will be discussing multiple categories, I want to clearly state each one by dividing them into separate sections. Each topic holds dominant relevance to finance and the ability to fully understand a business by comprehending how they work. Having the ability to understand the data projected from a business, is the bone structure for seeing how it grows or regresses. To aid in this understanding I would like to first start off with the income statement.

Reference for business expressed that an Income Statement is considered by many to be an organization’s most vital financial statement. It reveals the dollar amount of the profitability for an organization during a particular timeframe. This statement gives a record of an organization 's incomes and costs for a given timeframe and along these lines it is referred to as the profit and loss statement. Alongside the asset report and income statement, the income statement gives vital financial data to business supervisors, financial specialists, moneylenders, and auditors. There are two types of income statement the single step and the multiple step.

Income Statement by a company is the information on the financial statement of a business activity over a certain period of time usually a quarter or a year. It also explained how much revenue the business grew throughout a period of time and the cost it gained in relating to its revenue. Companies have to be able to bring money otherwise they would not be able to stay in business; therefore income statement show how well or how bad the company is doing.

Managers within a firm, including the owners and lenders, need to track the firm’s performance in order to be successful. Those individuals are able to review performance through analysis of the company’s financial statements. A firm’s financial statement consists of a firm’s income statement, balance sheet, and cash flow (In/Out). Businesses use these reports to understand the financial position of the firm. The reports can also serve as a tool when making decisions on how the firm will operate in the future and where it will go (Boundless, 2015).

The community pharmacy network which has evolved throughout Northern Ireland is ideally positioned to help to improve the health and wellbeing of the public (PSNC 2013). Patients are the core of any pharmacy business where pharmacists and technicians seek to enhance the quality and standards of existing services and seek to develop new health services for the benefit of the patient (PJ Online 2010). A pharmacy that decides to launch a new health service will require a well written business plan in order to obtain the necessary financial backing for the service to become a reality (Wilson 2008).

The business world requires exacting standards to ensure all costs are correctly accounted for and considered. To this end the financial statements have become the centerpiece for business evaluation. The income statement, balance sheet, statement of cash flow and ratios for analysis of financial statements play a critical role in business evaluation.

Income Statement: Income statement is mainly the report on Income. Its accounting definition is “Income= Revenue – Expenses”. Income statement shows how much it has cost the bank to acquire its deposits and other funds sources and to generate revenues from the uses the bank has made of those funds. It is also known as profit and loss statement or Statement of revenue and expense.

The main purpose of the income statement is to provide information to the investors, owners, and managers of the business about the revenue and expenses produced by the company for a period of time. The statement is usually issued quarterly or yearly depending on the business (Melicher & Norton, 2013). The major expenses that are found on an income statement are: cost of goods sold, operating expenses, taxes, and miscellaneous expenses.

4.3.4 Profit and Loss Account (Income Statement). Income statement is considered as a very significant statement, with more attention to the firm’s earning capacity as a measure of its financial strength. The earning capacity and potential of a firm is reflected by its income statement. The generally accepted convention is to show one year’s events in income statement. Since the income statement reflects the results of operations for a period of time, it is a flow statement. The income statement presents the summery of revenues, expenses and net income of a firm. It serves as a measure of the firm’s profitability. Revenues are amounts which the customers pay to the firm for providing them goods and services. The firm uses economic resources in providing goods CDCE Page 2

The income statement is used to show the company earnings during a specific period of time. The initial section shows gross profit, which is revenue minus variable costs. Income from operating activities and non-operating items is added to arrive at the total net income (or loss). This shows how much income a company generates from its sales, operating activities and overall. Hence, the creditor is able to see the financial health of the company and that it would be able to repay its loan.

A financial statement made up of three components: the Income statement, the Balance sheet and the Statement of cash flows. Income statement (or known as Profit and Loss statement or Statement of Financial Performance) are made in order to measure the profitability of a firm over a period of time (Block et al 2016, p. 26) and based on accrual accounting method which shows the earning activities in a specific period and the ability to generate