INCOME STATEMENTS Flashcards
1
Q
Cost of sales
A
costs that can be attributed to the production of products
2
Q
Expenses
A
costs that are not directly needed for the production of product
3
Q
Gross profit
A
revenue - cost of sales
4
Q
Profit (net profit)
A
gross profit - expenses
5
Q
Retained profit
A
profit - dividends
6
Q
What is an income statement
A
Financial record of revenue, cost and profit over a period of time
7
Q
Importance of profit
A
- measures success of a business/mangers performance
- decides weather to continue producing a product or not
- finances business growth
- attracts investors
8
Q
CASH VS PROFIT
A
- money invested into a business, borrowing, increases cash but not profit
- credit sales increase profit but do not increase cash until the receivable is received
- Profit = revenue - costs
- Net cash flow = inflow - outflow
