Business Mathematics Chapter 1: Stewardship
Terms to Know:
Section 7: Income, Cost of Goods Sold, and Operating Expenses
- Income is the revenue (money) received.
- Cost of goods sold is the amount of the business paid for the merchandise for sale.
- The utilities, employee wages, insurance, property taxes, office supplies, and any other expenses incurred by the business are operating expenses.
Division Process
- The number you are dividing in the division process is called the dividend.
- The dividend is divided by the divisor producing a quotient.
Section 8: Profit or Loss
- Net sales are your income from sales less any sales returns or allowances made.
- Net profit occurs if your expenses are less than the gross profit.
- Net loss occurs if your expenses are more than the gross profit.
- Net Sales = Sales - Returns and Allowances
- Gross Profit = Net Sales - Cost of Goods Sold
- Net Profit = Gross Profit - Expenses
- Net Loss = Expenses - Gross Profit
Equity
- A corporation is a business that is separate from the owners and employees.
- Average owner's equity = owner's equity beginning of the year + owner's equity end of year divided by 2
- Return on equity = net profit divided by the average owner's equity.
Section 9: The Income Statement
- Income statements list the income, the cost of goods sold, and the expenses of the business.
- Sales (Income) - Cost of Goods Sold = Gross Profit
- Gross Profit - Operating Expenses = Net Profit (or Net Loss)