From the income statement management can know which

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contains all the expenses charged against the income of the company. From the income statement management can know which type of areas the business has more expenses and need to be better managed. From the analysis, the company can come up with mechanisms to deal with the expenses. For instance if the gross profit is marginal it means that the cost of goods sold is high and that is what needs to be managed. Other documents include: Purchase orders Invoice from suppliers Payment stubs for interest Notes for loans Formal and Informal Networks The formal networks that can be used in analyzing the expenses include financial statements such as the income statements, source documents such as the receipts and internal management reports such as expenses reports. The informal documents include word of mouth from the suppliers, personal contacts of the employees, social and family contacts, among others. The information can be analyzed through the use of fundamental analysis, ratio analysis, horizontal and vertical analysis among others.
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