Income statements 5.3 Flashcards
How is profit made
Increasing revenue more than costs
Reducing cost of making product
What is the importance of profit to private sector businesses
Profit is needed to grow the business
If profit is made then the owners can make money as a reward
It can also be a source of finance
What is the difference between profit and cash
Not all cash paid into business is profit
Once all costs have been deducted from all revenue, amount left is the profit
What are the main features of an income statement
Revenue (Sellng price x Quantity sold)
Gross profit (Sales revenue – cost of sales)
Cost of sales (aka Costs of goods sold) is the cost involved in selling a product
Net profit (Gross profit – expenses) This is the actual profit after subtracting the business’ operating expenses
Retained profit (Profit kept by the business for its own use)