# How to Estimate Income Statements ••• Medioimages/Photodisc/Photodisc/Getty Images
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There are, generally, three types of financial statements, each of which tells an investor or analyst about the financial condition of a company. The balance sheet provides a listing of the company's assets and liabilities. The income statement provides an overview of the company's profits or losses, and the cash flow statement is a combination of both. It provides a listing of the inflows and outflows of cash.

Estimate sales by taking the sales from last year and applying a realistic growth rate based on past sales. For instance, if sales are growing at a rate of approximately 5 percent every year, multiply last year's income by one plus the growth rate. For instance, if sales for last year were \$100,000 then the sales estimate for next year is \$105,000.

Find the percentage of sales for each line item on the income statement by dividing the line item by sales.For instance, if the cost of goods sold is \$10,000 and gross profit is \$90,000, then the cost of goods represents 10 percent of sales and gross profit represents 90 percent of sales. Do this for each line item on last year's income statement.

Multiply the sales estimate by the percentage of income for each line item for an estimate of all costs. For instance, the cost of goods estimate is 10 percent multiplied by \$105,000 or \$10,500. The gross profit estimate is 90 percent multiplied by \$105,000 or \$94,500. Do this for the entire income statement until you've solved for an estimated net income.