The income statement and statement of financial position, profitability, liquidity and gearing ratios, working capital, and investment appraisal methods.
The main financial statements
Income statement — shows revenue, costs and profit over a period. Gross profit = revenue − cost of sales; operating profit = gross profit − overheads; profit for the year = after interest and tax.
Statement of financial position (balance sheet) — a snapshot of assets, liabilities and equity at a point in time. It must balance: assets = liabilities + equity.
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