Product managers need to have a solid foundation in business email list the fundamental financial skills of the business. Financial statements are the most important and commonly used documents in a business, and they are a fundamental tool for managing the business, making decisions, and communicating results to various stakeholders.
Here are some definitions of basic financial statements and vocabulary, including income statement, balance sheet, and cash flow statement. Products are "small businesses" for product managers and their teams, so these reports are applicable at the product level as well.
1. Income Statement
The income statement is a periodic report that reflects the profit of a company in a month, a quarter or a year, showing whether the company made a profit or a loss within a specific time interval. Each product should have its own income statement. Figure 7-12 shows the basic product income statement template.
Figure 7-12 Income statement of product XXX in 20XX (unit: yuan)
There's an easy way to look at the income statement: split it in two. The top half of the income statement is revenue and the specific costs of generating it, and the bottom half includes expenses by functional units and the expenses they incur in the day-to-day activities that support the business. The top half of the income statement begins with gross revenue, which is generated from the sale of products or services. Total revenue is calculated as:
Total revenue = unit price × sales quantity
If a company produces tangible goods, most of the cost comes from the production of the product (note that service companies and software companies generally don't have material costs, but you'll want to ask the finance department to see if there are costs in this area).
All "production specific" costs are referred to as cost of goods sold (COGS), which represent costs directly attributable to the production of the product, as well as overhead in the production of the product. Cost of goods sold usually includes the cost of raw materials, labor costs associated with assembling the product, and various direct and indirect overheads such as rent, electricity, etc.