PREPARING, ANALYZING, AND

FORECASTING FINANCIAL
STATEMENTS: QUANTIFYING
THE BUSINESS PLAN
FIGURE 7.1 (B)
Raw Work-In- Finish
Suppliers’ Goods
materials & Process
Credit Inventory
Supplies Inventory

Labor and Operating

Power & Depreciati Expenses
Supervisi-
Water -on Salaries,
on
Supplies,
Bank Loans Electricity,
Depreciation,
others

Stockholders’ Land, Building, Machinery, Equipment,

Equity Furnitures, Fixtures, Vehicles
CASH
 There are other operating expenses
that the corporation would have pay
for in cash. These are the salaries, the
supplies, the electricity, and other
expenses (e.g. travel and
representation, rental, etc).
 Notice that there are two types of
costs:
 PRODUCT COST
 COST OF GOODS SOLD
PRODUCT COST
- the cost of making the product.
COST OF GOODS SOLD
- the finished goods when sold.
• Then, there are the period costs, which
are the selling, general, and
administrative expenses.
• Next, ABC Corporation pays, in cash,
non-operating expenses, which are
really the interest expenses and other
financial charges owed to the banks.
 Next, ABC Corporation would have to pay
cash to the government for taxes.
 Once the company sells finished goods to
the customers, they become cost of goods
sold. In exchange, sales or revenues are
gotten from the customers.