38. income statements
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6 Terms
what is cost of sales and how is it calculated
the direct costs of purchasing the stock that is used to make sales. Most commonly it is the raw materials purchased
Opening stock + purchases - closing stock
What is gross profit and how is it calculated?
An indicator of how efficient the firm is at making and selling its product. It is used to judge how good a business is at making sales and how good it is at controlling the direct costs of making those sales.
Sales revenue - cost of sales
What is net profit and how is it calculated?
An indicator of how efficient the firm is overall this is because we include all the firms revenue and expenses in its calculation
Gross profit - total expenses
How can we see how good a business is at managing its expenses?
By comparing a firms net profit to its gross profit
What is the formula for percentage change?
The difference/ original x 100
Why create an income statement?
Legal requirements , tax requirements HM revenue and customs can request accounts from any business to ensure that the correct amount of tax being paid, to get my clothes or show potential investors, to obtain credit from suppliers