The spelling of the word "operating statement" is simple when one breaks down the phonetics. Using the IPA phonetic transcription, "operating" is pronounced as /ˈɑː.pə.reɪ.tɪŋ/ and "statement" is pronounced as /ˈsteɪt.mənt/. Therefore, the spelling of "operating statement" is straightforward: "op"-"er"-"at"-"ing" "stat"-"e"-"ment". This term is commonly used in the business world and refers to a financial report that outlines a company's revenues, expenses, and net income over a specific period of time.
An operating statement, also referred to as an income statement or profit and loss statement, is a financial document that provides a summary of a company's revenues, expenses, and net income over a specific period of time. Generally, this period is a month, quarter, or year. The primary purpose of the operating statement is to assess the profitability and financial performance of a business.
The operating statement presents the revenues generated by the company from sales of goods or services, which are often referred to as top-line revenue or sales revenue. It also includes any discounts, returns, and allowances deducted from the overall revenue. On the expense side, it outlines the costs incurred by the business to generate revenue, such as cost of goods sold, operational expenses, and administrative costs.
The operating statement calculates the gross profit by subtracting the cost of goods sold from the total revenue. It further deducts various types of operating expenses like rent, utilities, salaries, advertising costs, and depreciation to determine the operating profit or loss. Finally, it includes non-operating income and expenses, such as interest income or expenses, to arrive at the net income or net loss figure for the period.
Investors, creditors, and business managers widely use the operating statement to evaluate the financial health and profitability of a company. It provides insight into the efficiency of a company's operations, its ability to control costs, and its overall financial performance over time, serving as a valuable tool for decision-making and financial planning.
The word "operating" comes from the present participle of the Latin word "operari", which means "to work". The term "statement" originated from the Latin word "statio", which means "a station or standing". In the context of an "operating statement", the word "operating" refers to the activities of an organization or business, while "statement" implies a formal declaration or report. Therefore, the etymology of the phrase "operating statement" suggests it refers to a formal report that describes the financial activities or performance of an organization or business.