interpreting financial information Flashcards
definition of an income statement?
shows if a business has made a profit or loss over a specialised period of time.
what does cost of sales give you?
list 2
TVC or direct cost
what does the other operating expenses give you?
list 2
FC or indirect costs
equation for gross profit?
sales revenue - cost of sales
equation of operating profit?
gross profit - expenses
equation for gross profit margain?
gross profit / revenue x100
equation of operating profit margain?
operating profit / revenue x100
why is the shareholder (owner) interested in income statement?
list 3
- helps with planning
- calculate the tax they must pay on their profit
- conduct analysis of the gross and net profit ( identify areas for development)
why is the shareholder (lenders) interested in income statement?
list 1
- whether business is able to repay bank loan
why is the shareholder (government) interested in income statement?
list 1
- they pay the correct level of tax.
what are the methods of improving profits?
list 3
- sell the same quantity but a higher price.
- sell more at the current price.
- sell the same at the same price but reduce costs.
what are the statements of financial position (balance sheet)
- measure the net worth of a biz at a given point in time.
- balances net assets with total equity.
why is the shareholder (investors) interested in the statement of financial position?
list 2
- calc the value of the business
- able to assess the liquidity of the biz.
why is the shareholder (lenders) interested in the statement of financial position?
list 1
- decide what assets can be used as collateral against any external source.
why is the shareholder (owners) interested in the statement of financial position?
list 1
- calc ratio analysis to assess the overall performance of the biz.
