© 2011 Sixhills Consulting LtdFinance FundamentalsThere are two main parts to the accounts that measure the financial state of an organisationAnatomy of ‘The Books’Income Statement (‘P&L’)• Revenue - examples– Net Interest Income (NII)– Fees and Commissions, etc.• Cost of Revenue/Cost of Sales (Direct Costs) - examples– Direct Labour and Expenses– Commissions Paid• Overheads (Indirect Costs)– Management Costs– Research and Development– Marketing• Depreciation & Amortisation (of Assets)• Taxes– Corporation Tax• Dividends paidGross Profit = Operating Income – Cost of RevenueBalance Sheet• Assets– Fixed Assets (capital items such as IT kit, buildings, etc.)– Capitalised Development– Cash in the bank– Loans and Advances to Customers– Trade Debtors (money owed to us)• Liabilities– Customer Accounts (savings)– Trade Creditors (money owed by us)– Profit and Loss Account (retained profits/losses)Earnings Before Income Tax, Depreciation, Amortisation (EBITDA) = Gross Profit – OverheadsEarnings Before Income Tax (EBIT)/Profit Before Tax (PBT) =EBITDA – DepreciationNet Income = EBIT – TaxesRetained Profit = Net Income – DividendsCash  Profit/LossWorking Capital = Assets – LiabilitiesAssets are those things of value that belong to usOperating IncomeLiabilities are those things of valuethat belong to somebody elseP2IT Commercial Skills Development - Part 1
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