presents revenues ans expenses in distinct categories to facilitate financial analysis and manage decision making. 2 main section (operating and non operating) Operating revenues + expenses
-presents revenues ans expenses in distinct categories to facilitate financial analysis and manage decision making. 2 main section (operating and non operating)
Operating
revenues + expenses
relating to principal business
Non Operating
revenues and expenses that are indicated
Service Company
total operating expenses are subtracted from its service revenues to determine its income
Merchandising Company
the cost of goods sold is subtracted from the firms net sales to determine its gross profit on sales
Gross Profit
the difference between net sales and cost of goods sold and reveals the amount of sales revenue remaining after subtracting the cost of products sold
Net Sales
the total sales less an estimate of sales returns and allowances and sales discounts.
Ratio Analysis
expresses the relation of one relevant accounting number to another relevant accounting number through the process of division, result expressed as a percent
Return on Assets
net income/average total assets
Working with financial statements
to better understand net income money
Trend Analysis
-compares a company’s results, or the results of a ratio, over
time
-helps the financial statement user identify any readily observable trends in a
company’s performance
Benchmark Analysis
-compares a company’s performance, or ratio, to that of its
competitors, or to an industry
-compare a company’s performance to a similar company or against industry
standard
Current Ratio
widely used measure of a company’s liquidity
current ratio= current assets/current liabilities
Working without the statement of cash flows
3 categories
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