Profit, the statement of profit or loss and the statement of financial position

Learning objectives

Say what profit is and why a private sector business needs it: it rewards the owners for the risk they took, it can be reinvested as finance, it shows how well the business is doing and it draws in investors

Read a statement of profit or loss from top to bottom (revenue, cost of sales, gross profit, expenses, profit) and work out any of the five from the others

Use the figures in a simple statement of profit or loss to make a business decision and defend it

Sort the items in a statement of financial position into four groups: non-current assets (property, machinery), current assets (inventory, trade receivables, cash), current liabilities (trade payables, an overdraft) and non-current liabilities (a bank loan)

Work out total assets, total liabilities and working capital from a statement of financial position, and explain what capital employed is

Use the figures in a simple statement of financial position to make a business decision and defend it