5.3 Income Statements

Question 1

profit def?

Answer 1

$ bus makes over a particular time period

diff b/w P/S’ selling price & cost of supplying it (after subtracting revenue expenditure from sales revenue)

Question 2

income statement def

Answer 2

formal statement detailing bus’ made profit over a particular time period
- shows whole bus’ profit/loss over a period from all trading activities

Question 3

4 ways to use income statement to improve profit levels/maintain profit levels if anticipate drop in revenue due to potential recession/demand fall

Answer 3

• INCREASE REVENUE AMOUNT (lead to higher profits) (eg increase ads amount to raise demand)
• ORDER RM IN BULK (reduce RM costs to increase profit)
• IMPROVE PRODUCTION EFFICIENCY (cut waste levels (bus cost), leaner production= lower bus costs –> larger profits)
• CUT DOWN ON OVERHEADS (reduce workforce, cheaper electricity supplier, reduce marketing)