Purpose: Introduction Organizations continue to look for ways to improve business practices within their establishment. Throughout the years there has been numerous tools to help them achieve this outcome. In this brief discussion we will look at one of those tools and how they are currently used in today`s business practice. Income statements help determine a company expenditure and income over a period of time, showing whether the company has made a profit or loss (Collin, 2009). This information can be used by company in many ways to help determine the current and future profit margins within an organization. Why do many organizations make the effort to prepare a different type of income statement for internal purposes? It can be suggested that organization prepare different type of income statement for various reasons depending on how that particular information is utilized. The income statement is one of the three major financial statements. The other two is the balance sheet and the statement of flows (Income Statement Definition, 2003). Each of these statement provide information on how to improve profitability within a …show more content…
An organization cannot stay in business for a long period of time if it is not making money. For example, if we understand how cost effected the past we will be able to better understand the effects in the future. If a company losses profit during a certain season they will be able to reduce overhead and manufacturing cost during this season. Also, understanding how price change in certain market could help increase the profitability of an organization. Using this information, a company can determine when to implement sales in a certain category. Additionally, if a product is performing poorly in a given categories business owner will be able to determine if that product is replaced or redesigned to help increase