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16 Cards in this Set
- Front
- Back
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Matching Principle |
An organization can only recognize expenses when an associated sale takes place |
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Net Revenue |
The money a company gets from doing business with its customers (net sales) Revenue = Price * Volume |
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Revenue Recognition |
An organization can only record revenue when it has delivered a product or a service to a customer |
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Cost of Goods Sold (COGS) |
The cost of all materials and labor required to make a product Cost of Goods Sold = Supplies + Direct Labor |
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Gross profit |
The difference between the revenue from selling a product and the cost of producing that product Gross Profit = Revenue - Cost of Goods Sold |
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Operating Expenses (SG&A) |
They include selling costs, administrative costs (such as rent or insurance), and research and development costs (R&D), which are related to improving the product |
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Operating Profit |
Represents income generated from an organization’s operations in the normal course of business Operating Profit = Gross Profit - Operating Expenses |
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Pre-Tax Income |
Pre-Tax Income = Operating Profit - Interest Expense + Interest Income +/- Other Items |
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Net Income |
Net Income = Pre-Tax Income - Taxes (Profit) |
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Profit |
(Net income) |
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Less |
Minus |
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Gross Profit Margin |
Measures the profitability of production activities Gross Profit Margin = Gross Profit / Revenue |
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Revenue Growth |
Revenue Growth = (This Year’s Revenue / Last Year’s Revenue) - 1 |
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Profit ratios (margins) |
The amount of a particular profit measure relative to revenue |
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Operating Margin |
Measures profitability after all the expenses of running an organization are taken into account Operating Margin = Operating Profit / Revenue |
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Net Income Margin (Profit Margin) |
The ratio of net income to total revenue after all expenses, including taxes, are paid. It is used to judge an organization’s overall profitability. Net Income Margin (or Return on Sales) = Net Income / Revenue |
