2.3 keywords Flashcards
profit
Sales Revenue - Total Costs
gross profit
Sales Revenue - Cost of Sales
operating profit
Gross Profit - Other Operating Expenses
net profit
Operating Profit - Interest and Tax
cost of sales
Costs directly linked to the production of the goods/services sold, e.g. raw materials.
exceptional items
Any unusually large or infrequent transactions.
income statements
A formal financial document that summarises a business’ trading activities and expenses to show whether the business has made a profit or loss.
profitability
Measures the efficiency of a business in generating profit. They can be measured through profit margins.
gross profit margin
Gross Profit / Revenue x 100
operating profit margin
Operating Profit / Revenue x 100
net profit margin
Net Profit / Revenue x 100
balance sheet
A financial statement that shows the assets, liabilities and capital of a business on a particular date.
liquidity
The proportion of a business’ assets that are held in a form easily converted to cash.
current ratio
Current Assets / Current Liabilities : 1
acid test ratio
Current Assets - Inventory / Current Liabilities : 1
working capital
The amount of money available for the day to day running of a business.
assets
Owned by a business or owed to the business.
liabilities
A business that owes money to an individual. It shows the source of capital the business has raised in order to purchase its assets.
non current assets
Assets that is expected to be retained for more than one year.
current assets
Assets that are likely to be converted into cash by the next balance sheet, e.g. cash inventories (stock)
non current liabilities
Debts that will take longer than one year to pay e.g. bank loan, mortgages
current liabilities
Debts that will be paid off within a year or less e.g. trade credit.
total equity
This is the assets (usually cash) received from the shareholders plus nay profits made by the business through trading that remains undistributed. This should be equal to Net Assets.
