3.7.2 Financial ratio analysis Flashcards
Sales revenue
The initial value of money made, at the start of the income statement
On the income statement
Cost of sales
Also known as variable costs; expense of the sales, eg, purchases and delivery
On the income statement
Gross profit
Least accurate value of profit
On the income statement
Calculation for gross profit?
Sales revenue - Cost of sales
On the income statement
Expenses
Also known as fixed costs; expenses that are always charged no matter what, eg. rent, salaries, depreciation, etc
On the income statement
Operating profit
Relatively accurate measurement of profit
On the income statement
Operating profit calculation?
Gross profit - Expenses
On the income statement
Tax
Corporate tax often calculated as a percentage of the operating profit.
On the income statement
Net profit
The final most accurate valuation of the profit of that financial year
On the income statement
Assets
anything belonging to the business that brings in revenue
On the balance sheet
Non current assets
Assets that will take more than a financial year to be liquidised.
On the balance sheet
Current assets
Assets that can be liquidised within a financial year
On the balance sheet
Examples of current assets
- Inventory
- trade receivables
- other receivables
- cash and cash equivalents
(in order of hardest to easiest to turn into cash)
On the balance sheet
Examples of non current assets
Vehicles, premises, machinery
On the balance sheet
Non current liabilities
Liabilities that are not predicted to be paid back within the next financial year
On the balance sheet
