445316
Description
Mind Map by charcrawford, updated more than 1 year ago
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Created by charcrawford
over 10 years ago
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8. Income Statements (P&L accounts)
- Accounting statement showing s firm's sales revenue over a trading
period and all the relevant costs generated to earn that revenue. PLC's
use income statements, small firms use profit and loss accounts.
- Who Wants to See the Income Statements?
- Shareholders (assessing profitability)
- Gov agencies (tax authorities require data
on P&L to calculate corporation tax)
- Suppliers (need to know financial position to establish
their reliability, stability and creditworthiness)
- Potential shareholders and bankers
(commit funds?)
- Shareholders (assessing profitability)
- The Uses of Income Statements
- Measure success of a business compared
to previous year or another
- Assess actual performance
compared with expectations
- Help obtain loans from banks
- To enable owners and managers to
plan ahead i.e. future investment
- Measure success of a business compared
to previous year or another
- Measuring Profit
- Profit = Revenue - Costs
- Gross Profit
- Measure of the difference between income
(sales revenue) and the cost of
manufacturing/ purchasing the products sold.
- Can compare with other
companies, maybe find
cheaper supplier or boost
prices?
- Measure of the difference between income
(sales revenue) and the cost of
manufacturing/ purchasing the products sold.
- Net Profit
- /Operating Profit.
- Net Profit = Gross Profit - (expenses + overheads)
- Takes everything into account. If small net profit, business may
need to control costs such as salaries/ distribution
- /Operating Profit.
- Profit Quality
- Profit = Revenue - Costs
- Determining Profit
- Examining Income Statements
- Public Limited Companies
- Income Statements and the Law
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