Income Statement Flashcards
(13 cards)
What is the purpose of a Profit & Loss Statement (P&L)?
To show a business’s performance over a period of time.
What does revenue represent?
The total income generated from goods sold or services provided.
What are expenses?
Costs incurred in the process of generating revenue.
What is profit?
Profit occurs when revenue exceeds expenses.
What is a loss?
A loss occurs when expenses exceed revenue.
What are direct costs?
Expenses that can be directly attributed to the production of goods sold or services provided.
What is included in an income statement?
Revenue, cost of sales, gross profit/loss, overhead expenses, operating profit/loss, interest expense, tax expense, and net profit/loss.
What is gross profit?
Revenue minus the cost of goods sold.
What are overhead expenses?
Indirect fixed costs such as rent, salaries, insurance, and administrative expenses.
What is the bottom line in an income statement?
Net profit or loss.
What are retained earnings?
Net profits held for future use, stored in the balance sheet.
What does financial ratio analysis provide?
Valuable insights about a business’s profitability, efficiency, liquidity, and leverage.
What is a comparative period?
A different period of time used for analysis.
