Impacts to the Profit and Loss Statement
AB299-02 Associates Capstone in Management
January 21, 2013 As we can see, Tim’s Coffee Shoppe is one of the more successful businesses in town; being located near the local university gives Tim a great customer base. Tim’s Coffee Shoppe seems to acquire most of its business from the college students along with the people who work in the area.
Once we begin to take a look at Tim’s income statement, greatest expense is the supplies for the coffee shop. Since there are new businesses that are moving in and around town, it is safe to say that Tim’s business will probably pick up. If his business picks up then Tim’s income will increase. But there is a price to pay with the increase in his income; there will be an increase in his expenses. We can see that Tim’s highest expense is his supplies, so this also means he will have to put out more money to increase his supply of supplies.
It seems the second highest expense was salaries. Being that Tim will be gaining more business, he’s going to need more manpower to help serve the customers that will be coming in. This means Tim will have to pay more employees and in turn, his salary expense will increase.
As expected, taxes, rent, depreciation, leasing, insurance and interest follow. In the year 2008, Tim’s Coffee Shoppe earned $400,527 while his total expenses were $326,016. This leaves Tim with a net income of $74,511. So the question is asked, will Tim’s business grow and increase if other businesses move into the area?
It doesn’t look like any of Tim’s expenses will be decreasing due to the increase in his business. Tim’s current income statement shouldn’t change much. I think the bottom line is that Tim will continue to earn and spend just as he did before. It’s a fact that he will gain more income due to the increased business, but it is also a fact that his expenses