Math Tools for Journalists Chapters 5-8

Chapters 5-8

 

 

            This chapter deals with business and some of the numbers one might see when dealing with business reporting.  Some of the kinds of business reporting that you usually see include; press releases, quarterly earnings reports and annual reports.

            6.1- Financial Statements

            Financial statements, as defined by Wickham, are formal documents available to shareholders, regulatory agencies, and other stakeholders interested in a company’s performance.  They come in many different forms but they generally include a profit and loss report and a balance sheet. 

            6.2- Profit and Loss

            A profit and loss statement basically shows whether or not the company is making money.  Different businesses present the information with different methods.  Some important terms to know about profit and loss include “cost of goods sold” which is the direct expense a company incurs in making or buying its products (Wickham) and “overhead” which is the expenses not directly related to the product being made (Wickham).  An important term to know is EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization)  which figures out how much cash a company is earning without regard to items unrelated to current business (interest payments, taxes, depreciation, and amortization need to be accounted for no matter how a company is doing). 

 

Formulas

 

  • Gross Margin= Selling Price – Cost of Goods Sold
  • Gross Profit= Gross Margin x Number of Item Sold
  • Net Profit= Gross Margin – Overhead
  • Assets= Liabilities + Equity

 

6.4 Ratio Analysis

Ratios are important because the give the company a better idea of where they stand in their respective field.  They examine trends in a company’s life and are often used to compare companies in the same field (Wickham). 

 

Formulas

 

  • Current Ratio= Current Assets / Current Liabilities
  • Quick Ratio= Cash / Current Liabilities
  • Debt-to-Asset Ratio= Total Debt / Total Assets
  • Debt-to-Equity= Total Debt / Equity
  • Return on Assets= Net Income / Total Assets
  • Return on Equity= Net Income / Equity
  • Price Earnings= Market Price/Share   /   Earnings/Share

 

 

Practice Questions

 

  1. Q:  You own pie stand in a carnival and you sell pies for $3 per pie.  Each pie cost $1 to make.  What is the overall gross margin?

A: $2

 

  1.  Q:  With that same example, today your pie stand sold 25 blueberry pies, 35 apple pies and 5 pumpkin pies.  Calculate the overall gross margin.

A: $130

 

  1. Q: Unfortunately, in order to run the pie stand, the carnival charges vendors a daily fee of $15.  What is the net profit after overhead?

A: $115

 

  1. Q: After a week’s worth of selling, your pie stand has made $800.  However a local baker offers you $1,200 for the use and rights of your pie stand.  However you still owe the carnival for 6 days use.  Calculate your assets.

A: $490

 

 

 

Skill Drill Answers

 

  1. $990
  2. $229
  3. a.  610,766…614,908…877,370…673,514
    1. 1999…2000
    2. 19%…24%…
    3. Property, the same is true in 2000. 
  4. a.  about 10%
    1. Newspapers
    2. 22%
    3. 228,287 in 1999 and 275,550 in 2000
    4. Not really, even though they made a good amount of money they also spent a lot so their net income wasn’t that high.  In 1999 they had a smaller parentage of loss. 
Advertisements
Explore posts in the same categories: Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: