In the last article, we wrote about the key components of an audited financial statement, in this article we shall be looking at the key figures to consider in an audited financial statement, these includes:
1. REVENUE: This figure represents the total amount of money the company has earned from its operations during the reporting period.
2. GROSS PROFIT: Gross profit is calculated by subtracting the cost of goods sold from revenue. This figure provides a measure of the profitability of a company’s core operations.
3. OPERATING EXPENSES: Operating expenses include all costs incurred during the normal course of business, such as salaries, rent, utilities, and advertising.
4. NET INCOME: Net income is calculated by subtracting total expenses from total revenue. This figure represents the company’s profit or loss for the reporting period.
5. ASSETS: Assets are resources owned by the company that have monetary value and can be used to generate future economic benefits. Examples include cash, investments, and property.
6. LIABILITIES: Liabilities are obligations owed by the company, such as loans, accounts payable, and taxes owed.
7. EQUITY: Equity represents the residual interest in the assets of the company after liabilities have been subtracted. This figure represents the value of the company’s assets that is owned by its shareholders.
8. CASH FLOW: Cash flow represents the amount of cash the company generates from its operations, investments, and financing activities.
9. RETURN ON INVESTMENT (ROI): ROI is a measure of the efficiency and effectiveness of an investment. It is calculated by dividing net income by total assets.
10. TAX PROVISIONS: The tax provisions represent the estimates of tax liabilities the company has incurred but has not yet paid.
It’s important to take note of these figures because they provide important information about a company’s financial health and performance. For example, a company’s revenue and net income can give an indication of its overall financial performance, while its assets, liabilities, and equity can provide insight into its financial position. Understanding these figures can help investors make informed decisions about whether to invest in a company and can also help assess the overall risk of lending money to the company.
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Tolulope Oguntade Regville Associates info@regville.com 08065111667