FNCE 3001 Week 2 Income Statement Walkthrough Example

Walking Through Juniper Peak Sports' Fiscal 2025 Income Statement Block by Block: Revenue, Cost of Goods Sold and Gross Profit, Operating Expenses and the Path From Operating Income to Net Income

Student Name

Walden University

FNCE 3001: Financial Management

Instructor Name

Month Day, Year

Walking Through Juniper Peak Sports' Fiscal 2025 Income Statement Block by Block: Revenue, Cost of Goods Sold and Gross Profit, Operating Expenses and the Path From Operating Income to Net Income

The Statement

This walkthrough explains the consolidated income statement of Juniper Peak Sports, the composite outdoor and ski retailer used throughout this course, with fourteen stores in Colorado and Utah, for its fiscal 2025, the twelve months that closed on January 31, 2026. The statement is taken from the company's annual report and is reproduced in Table 1. All figures are in thousands of U.S. dollars, so $84,000 means $84 million. The prior year is shown beside it for comparison.

Table 1

Juniper Peak Sports Consolidated Income Statement (in thousands of U.S. dollars)

The company and its figures are composite and constructed for this walkthrough.

Revenue

Net sales were $84.0 million in fiscal 2025, up from $78.0 million, an increase of 7.7 percent. In plain terms, customers paid the company $84 million for goods during the year, after subtracting returns and discounts. The word "net" matters: under the revenue standard companies follow, revenue is recorded when a customer takes control of the goods, and expected returns are deducted (Financial Accounting Standards Board [FASB], 2014). The notes to the statement explain that gift cards are recorded as revenue only when they are redeemed, so a gift card sold in December and used in February counts in the later year. According to the management discussion, a store opened in Provo, Utah, in April accounts for roughly half the increase, with existing stores supplying the rest.

What the Goods Cost and What Was Left

Cost of goods sold was $50.4 million: what Juniper Peak paid its suppliers for the skis, bicycles, tents and clothing it sold during the year, including freight to its stores. Subtracting it from net sales leaves gross profit of $33.6 million, the amount available to pay for everything else the company does. As a share of sales, gross profit fell from 41.0 percent to 40.0 percent. That one-point decline is worth about $840,000 at fiscal 2025 sales. The notes attribute it to deeper discounting of ski equipment after a short snow season. A reader should notice that gross profit still rose in dollars, by $1.6 million, even as the margin fell. Both facts are true at once, and the walkthrough reports both, because a manager looking only at the dollar figure would miss that each sale now contributes less.

Running the Stores and the Office

Selling, general and administrative expenses were $24.4 million: store wages, rent, utilities, advertising, and the salaries and systems of the head office. These are the costs of running stores and the business, and they rose 7.7 percent, in step with sales. Depreciation and amortization of $2.1 million is different. It does not record a payment made this year; it spreads the cost of store fixtures, equipment and leasehold improvements bought in earlier years across the years they are used (Brigham & Houston, 2022). After both lines, operating income was $7.1 million, down from $7.4 million. The business sold more but earned less from its operations, because gross margin slipped while operating costs grew with sales.

From Operating Income to Net Income

Interest expense of $0.9 million is what the company paid lenders on its term loan, which it has been paying down. Subtracting it gives income before taxes of $6.2 million. Income tax expense of $1.6 million is an effective rate of 25 percent, combining the federal rate with state taxes in Colorado and Utah. Net income, the bottom line, was $4.7 million, or $1.17 for each of the company's four million shares, compared with $4.8 million and $1.21 a year earlier.

What the Walkthrough Shows

Read from top to bottom, the statement tells one story: sales grew, but the company kept less of each sales dollar as gross profit, and operating costs did not fall to compensate, so profit declined slightly. Interest fell because the company owes less, which helped a little. Anyone asking whether the company has more cash, not just more profit, will need the cash flow statement, because an income statement records sales and expenses when they are earned and incurred, not when cash moves (Ross et al., 2022).

References

Brigham, E. F., & Houston, J. F. (2022). Fundamentals of financial management (16th ed.). Cengage Learning.

Financial Accounting Standards Board. (2014). Revenue from contracts with customers (Topic 606) (Accounting Standards Update No. 2014-09).

Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2022). Fundamentals of corporate finance (13th ed.). McGraw Hill.