MBA Math Monday Income Statement

The MBA Math Monday series helps prospective MBA students to self assess their proficiency with the quantitative building blocks of the MBA first year curriculum. The first and second MBA Math accounting exercises examined the balance sheet, which represents the sources and uses of a firms funds at a snapshot in time. The first exercise focused on balance sheet structure and logic. The second exercise focused on how transactions during a period in time must be appropriately processed to create a new balance sheet at the end of the period. This exercise introduces the income statement, which is a financial statement that shows a firms revenues and expenses during a period of time, typically a quarter or a year. The proverbial bottomline in business is the profit or loss at the bottom of the income statement. Before you can interpret an income statement, you need to understand how its structure flows from revenue at the top to profit or loss at the bottom, with various categories of cost in between. Exercise: Suppose Lightspeed Industries has the following revenue and expenses (listed in alphabetical order) for 2008: Revenues of $8,800,000Cost of Goods Sold of $2,640,000Depreciation Expenses of $1,200,000Income Taxes of $1,452,000Interest Expenses of $50,000Other Expenses of $400,000Sales, General, Administrative Expenses of $880,000 Create an income statement with amounts in thousands What is the value of Pre-Tax Income? Solution (with audio commentary): click here Prof. Peter Regan created the self-paced, online MBA Math quantitative skills course and teaches live MBA courses at Dartmouth (Tuck), Duke (Fuqua), and Cornell (Johnson).