5.4b - Analysing Profitability Flashcards
1
Q
What do income statements identify?
A
The amount of profit a business has made over a year
2
Q
What are the components of an income statement?
A
- Revenue
- Cost of sales
- Gross profit
- Expenses
- Operating profit
- Exceptional items
- Finance income
- Finance costs
- Tax
- Profit for year
3
Q
Gross profit margin formula
A
(Gross profit / revenue) X 100
4
Q
Operating profit margin formula
A
(Operating profit / revenue) X 100
5
Q
Profit for year margin formula
A
(Profit for year / revenue) X 100
6
Q
What does a low gross profit margin indicate?
A
High cost of sales
7
Q
How can profitability data be compared?
A
- To different years
- To different businesses
- To a target
