Scenario: Selamawit has just completed her first three months (Q1) of operating her clean cookstoves and biofuel briquette shop in Hawassa. She wants to see how her business performed.
Selamawit’s Q1 Financial Data:
- Total Revenue: ETB 75,000 (from selling 50 cookstoves at ETB 1,000 each and 250 bags of briquettes at ETB 100 each, and some repairs)
-
- (50 – 1000) + (250 – 100) = 50000 + 25000 = 75,000
- Cost of Goods Sold (COGS): ETB 40,000 (cost of purchasing cookstoves and materials for briquettes)
- Operating Expenses:
- Shop Rent: ETB 15,000 (3 months – ETB 5,000/month)
- Marketing & Promotion: ETB 1,000 (flyers, social media boosts)
- Utility Bills: ETB 3,000
- Transportation (for supplies): ETB 2,000
- Interest Expense: ETB 500 (on a small loan from a microfinance institution)
- Tax Expense: ETB 1,500 (estimated for the quarter)
Selamawit’s Q1 Income Statement Summary:
|
Description |
Amount (ETB) |
|
Total Revenue |
75,000 |
|
Cost of Goods Sold (COGS) |
40,000 |
|
Gross Profit =Revenue−COGS ETB 75,000 – ETB 40,000 = ETB 35,000 |
35,000 |
|
Operating Expenses |
21,000 |
|
Earnings Before Interest & Tax (EBIT)Gross Profit−Operating ExpensesETB 35,000 – ETB 21,000 = ETB 14,000
|
14,000 |
|
Interest Expense |
500 |
|
Tax Expense |
1,500 |
|
Net Profit (Net Income) =EBIT−Interest−Taxes
ETB 14,000 (EBIT) – ETB 500 (Interest) – ETB 1,500 (Tax) = ETB 12,000 |
12,000 |
Analysis for Selamawit: Selamawit’s business made a net profit of ETB 12,000 in its first quarter. This is a positive sign! It shows that her sales are strong enough to cover her costs and even leave some money for reinvestment or personal use. She should continue to track this regularly to see if her profits are growing.