Even if you are not an Accountant, you would most likely encounter an income statement or other simply refer it to a profit and loss statement. An income statement is very useful to determine the viability of any business and any person. It is used both from a business perspective and should also likewise be used in a personal way. I often say that the principles of corporate finance is the same as personal finance, just varying in application and terminologies.

Income statements are very important to determine the profitability of company and is likewise a good way to determine your personal profitability.

So what is an income statement? A typical definition  is that it is a financial statement that measures a company’s financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year.

Ivestopedia.com has a better way of explaining what an income statement is —

The income statement is the one of the three major financial statements. The other two are the balance sheet and the statement of cash flows. The income statement  is divided into two parts: the operating and non-operating sections.

The portion of the income statement that deals with operating items is interesting to investors and analysts alike because this section discloses information about revenues and expenses that are a direct result of the regular business operations. For example, if a business creates sports equipment, then the operating items section would talk about the revenues and expenses involved with the production of sports equipment.

The non-operating items section discloses revenue and expense information about activities that are not tied directly to a company’s regular operations. For example, if the sport equipment company sold a factory and some old plant equipment, then this information would be in the non-operating items section.

Still confused? Here’s a video that might help…

Whew! It’s a good thing I decided study Economics instead of Accounting 😉

People all over the world are looking at places where they want to invest their money. Should they be looking at the Philippines? According to a video clip from Bloomberg, they should!

Here’s more good news about the Philippines — our economy is growing and continues to grow!

Bill Luz of the National Competitiveness Council (NCC) sent out a statement through email about this awesome news. Posting the release below:

5 September 2012                                                                                                     

Philippines jumps another 10 spots in global competitiveness report

Country now ranks No. 65, up 20 positions in the last two years

 We are pleased to announce that the Philippines has jumped another 10 spots to No. 65 out of 144 economies in the World Economic Forum’s 2012/2013 Global Competitiveness Report from No. 75 the year before. This is the second year in a row that the country has risen by 10 ranks in the report. The Philippines is only one of two countries worldwide which has made a double-digit jump in the last two years. Coming from No. 85 only two years ago, this also marks the first year that the country has broken into the top 50% of the world rankings since it was first included in the report in 1994. The country once ranked in the bottom 25% of the world’s economies.

In last year’s report, we reported that the key drivers for improvement in the rankings came in the areas of Macroeconomic Environment, Technological Readiness, Market Efficiency for Goods, and Institutions or Governance. The key constraints came in the areas of Institutions and Governance, Infrastructure, Innovation, Labor Market Efficiency, and Education.

Over the last year, the government – through the National Competitiveness Council, working in partnership with government agencies across a broad front – concentrated its efforts on building up the competitiveness position of the country. That work has begun to gain some traction and has resulted in improved rankings in 11 of the 12 categories covered in the Global Competitiveness Report.

In the area of Institutions which measures governance, security, private sector ethics, and accountability, the country recorded its largest gain, up 23 positions from No. 117 in 2011/12 to No. 94 in 2012/13. The largest gains were made in the areas of property rights (up 31), less diversion of public funds (up 27), higher trust for politicians (up 33), less irregular payments or bribes (up 11), more fair awarding of contracts (up 19), less favoritism in government decisions (up 31), less wastefulness of government spending (up 23), more transparency in policy formulation (up 23), ethical behavior of firms (up 31), strong audit and reporting standards (up 21), and stronger minority shareholder interests (up 27).

However, the judiciary and security situations continued to be rated low by investors. Judicial independence was rated No. 99 while the quality of judicial decisions was rated No. 111. The efficiency of the legal framework in settling disputes was rated No. 107. The business costs of fighting terrorism, crime, violence, and organized crime were all rated below No. 100.

The Macroeconomic Environment continued to make great gains, jumping 18 spots to No. 36 worldwide. The management of the budget, national savings rate, and general government debt all received high scores.

In Infrastructure, one of the weak spots last year, the country rebounded with a gain of 7 from No. 105 in 2011/12 to No. 98 in 2012/13. While the overall quality of physical infrastructure jumped in rank by 15 to No. 98, only road quality jumped significantly by 13 to No. 87. Port and airport infrastructure continued to be ranked poorly at No. 120 and No. 112, respectively. While the quality of electricity supply improved by 6 spots, it still remained low at No. 98.

Higher education and training began to show some positive gains, up 7 to No. 64. In particular, the quality of primary education jumped 24 positions to No. 86 while secondary and tertiary education quality improved by 16 spots to No. 45. Science and math education jumped 17 positions to No. 98. Interestingly, the enrollment levels for primary, secondary, and tertiary levels recorded dropped by 20 and 1 respectively to No. 101 for primary and No. 76 for tertiary. We attribute the trend to investors’ recognition of gains made in the start of the new K-12 program but that enrollment rankings may reflect lags in the posting of data by international institutions.

In Financial Market Development, the country improved by 13 to No. 58, mainly on the strength of gains in the regulation of exchanges (up 18) and the already strong position in availability and affordability of financial services.

The country also recorded a turnaround in the area of Labor Market Efficiency with a jump of 10 to No. 103. The greatest gains were made in labor-employer relations (up 17), pay and productivity (up 19), reversal of the brain drain (up 20), and the reliance on professional management (up 12). However, inflexibility of wage determination (down 15) continued to remain a drag on labor markets.

Gains were also recorded in Technological Readiness and Innovation, particularly in the areas of FDI and technology transfer (up 26 to No. 40), company spending on research and development (up 27 to No. 58), government procurement of advanced technology (up 19 from a low base to No. 107), and intellectual property protection (up 15 to No. 87).

Plenty of work remains on the business transaction side, with major improvements needed in reducing the number of steps to start a business (No. 137), number of days to start a business (No. 112), burden of customs procedures (No. 126) and total tax rate (No. 102).

Much work also remains to be done in the primary health sector, where rankings in malaria and tuberculosis treatment and lower life expectancy all ranked below 100 in global tables. Infant mortality still ranked only No. 91 worldwide.

The gains would not have been possible without the efforts put in by the NCC Board and 11 Working Groups and staff which each focus on a problem area and the various Cabinet departments and agencies assigned to each of these problems. On behalf of the board, I wish to thank all the public and private sector individuals for their collective efforts to achieve this unprecedented back-to-back 10 country jump in the past two years. We will continue to remain focused and committed to improving our ranking to be able to meet our target of being in the top one-third of global ranking by 2016.

In this regard, the National Competitiveness Council has expanded its programming to now include Regional Competitiveness Committees (presently in 12 regions across the country), more Monitoring and Evaluation efforts, including large-scale surveys and small customer satisfaction surveys, and our new Dialogues series to enable people to be informed, get engaged, and act to bring about positive change in the country.

Thank you.