[FIN 305] - Midterm Exam Guide - Ultimate 50 pages long Study Guide!
5 Oct 2016
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Profitable growth = key determinant of overall value: growth (which feeds into positive 2, profits (which feeds into positive 3, cash flow, liquidity (lenders" concern, solvency (lenders and investors" concern) 3 blocks: revenue: sales from all sources, operating expenses: separate operating expenses (e. g. cogs, salary, etc) from other expenses like interest and depreciation to calculate operating income different from net income. Example: if you want to compare two restaurants with different financing models, profits. Interest expense is from debt financing, not operations, so not in operating expenses shouldn"t include interest in operating profits because comparison would be skewed. For merchandisers/retailers, etc: revenue - cogs, op ex, misc ex. Gross profit = sales rev - cogs. Sales volume drives revenue, cogs, gross profit. Volume of jeans sold = more profit at every level. Ratio: gross profit margin % = gross profit $ sales revenue $ Important re: buying power, pricing strategy, competitive strengths.
