Income Statement Flashcards
(29 cards)
What is revenue?
Amount of assets created through the sale of goods and services.
What are expenses?
Costs incurred in normal business operations to generate revenues.
Example: utilities and employee salaries.
How do expenses affect assets and equity?
Expenses cause a decrease in assets and equity.
What is the difference between revenue and net income/loss?
Revenue is a gross concept while net income/loss is a net concept.
What is the difference between revenue and assets?
Assets can be generated by liabilities or revenue, but revenue generates assets always, such as accounts receivable or cash.
What is the Gross profit/margin equation?
Sales - Cost of Sales (or goods sold) = Gross profit/margin.
How is gross profit percentage calculated?
Gross profit / Sales = Gross profit percentage.
Name four operating expenses?
Salaries, advertising, depreciation, supplies.
How is operating income calculated?
Gross Profit - Operating Expenses = Operating Income.
What is operating income?
Performance of fundamental business operations conducted by a company, indicating how well a business is performing in its unique activities.
What are considered non-operating expenses?
All expenses are operating expenses except interest and income tax.
What is another term for operating income?
Earnings before interest and taxes (EBIT).
How is income before taxes calculated?
Operating income - (revenues, gains, expenses, losses) = Income before taxes.
What does net income summarize?
A company’s overall economic performance for a given period.
What are gains?
Increases in assets from peripheral activities.
What are losses?
Decreases in assets from peripheral activities.
What is gross profit?
The amount left over after covering the direct costs of goods. It indicates how profitable the core products or services are.
What is the cost of goods sold (COGS)?
The direct cost of producing or purchasing the goods a company sells, like materials and labor directly tied to production.
What does a decrease in gross profit percentage indicate?
It may mean that COGS has increased relative to sales, which could be concerning.
What are non-operating expenses?
Expenses not related to core business activities, like interest on loans or one-time restructuring costs.
What is income tax expense?
The last item deducted on the income statement, representing all tax obligations for the period.
What is net income?
The amount arrived at after deducting income tax expenses, also known as profit or earnings.
What is an example of a loss?
Restructuring debt or losing money.
What are restructuring charges?
Not reoccurring items, separate line on the income statement.
