Year 13 - November Test Flashcards
What does the income statement show and what does it consist of?
Shows the reader how much profit or loss the organisation generated during a period of time - consists of revenues and expenses
What does gross profit show
Shows the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing the service.
What is meant by cost of sales (COGS)
Represents the direct costs associated to manufacturing or purchasing of a good that is sold to a customer
Gross profit formulae
Net sales - cost of goods sold
What is operating profit
The profitability of the business before taking into account interest and taxes
Operating profit formulae
Operating profit= operating revenue - cost of goods sold -operating expenses -depreciation -amortization
What is the purpose of a balance sheet and what does it consist of?
To reveal the financial status of a business as of a specific point in time.
Consists of: company’s non current and current assets, current and no current liabilities and shareholders equity
3 basic elements of a balance sheet
Assets, liabilities and owners equity
Examples of non current assets
Land
Property
Investment in other companies
Machinery
3 examples of currents assets
Cash
Inventory
Short term investment
Difference between current and non current assets and current and non current liabilities.
Current assets convert cash within one fiscal year non current assets are long term assets that a company expects to hold over one fiscal year.
A current liability is expected to be paid in one year or less. Non current liability is a liability expected to be paid off for longer than one year.
How are net assets calculated
(Total fixed assets + total current assets) - (Total current liabilities +total long term liabilities)
What should the net assets be equal to
Stockholders equity of a business
What does equity mean on a balance sheet
The difference between the businesses worth (assets) - (debts and liabilities)
Current ratio formulae
Current assets / current liabilities
