income statements and profit Flashcards
1
Q
income statement key facts
A
- financial records are called accounts
- companies are required by law to produce accounts
- these accounts must be accurate and up to date
2
Q
features of income statement
A
- revenue
- cost of sales
- gross profit
- net profit
- retained profit
3
Q
who uses income statements
A
- business owners
- business managers
- potential investors
- governments
4
Q
uses of income statements
A
- compare with previous years to judge success of business
- compare with competitors to judge success of business
- judge if cost of sales has fallen or risen
- judge if expenses need reducing
- assess how much retained profit is available
- assess how much profit is available for dividends/drawings
5
Q
lack of financial records
A
- not knowing how much is owed by business and to whom it is owed
- the business not meeting orders if it runs out of cash
- not knowing if the business has made a profit or a loss
6
Q
gross profit formula
A
revenue - cost of sales
7
Q
net profit/profit
A
gross profit - expenses
8
Q
retained profit
A
profit left and reinvested back into the business after deduction of all payments
9
Q
cash vs. net profit
A
a business could have made a profit but have not been paid for the goods yet and therefore does not have any cash in the business
