Lecture 6 Flashcards
(13 cards)
Accounting equation
Assets = liabilities + equity
Profit calculation
Profit = revenue - expenses
Costs of goods sold (COGS)
COGS = opening inventory + purchases - closing inventory
Gross profit
Gross profit = sales revenue - COGS
Operating profit (PBIT)
Operating profit = gross profit - operating expenses
Net profit before tax (PBT)
PBT = operating profit - interest
Profit after tax (PAT)
PAT = PBT - tax
What are the three major financial statements?
Income statement, balance sheet, cash flow statement
What is the fundamental accounting equation?
Assets = liabilities + equity
How is gross profit calculated?
Gross profit = sales revenue - costs of goods sold
Why is the income statement important for external stakeholders?
It shows profit profitability, supporting investment and credit decisions
What kind of expenses appear under operating expenses?
Rent, salaries, insurance, utilities, vehicle expenses
Does the income statement show a businesses financial position at one point in time?
No, it reflects performance over a period
