Reading Material_ Bottom Line (RMM)

Reading Material_ Bottom Line (RMM) -...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
RETAIL FINANCE (RMM-II 2009-11) The Myth of the Bottom Line      Retail business owners are conditioned from day one to have a profit and improve their bottom line. Yet,  sadly, most owners aren’t sure exactly why. What is profit, where does it go, and why is it important?  These are questions that we shouldn’t have myths about! The first thing to learn is that most retail businesses are on the accrual accounting system and, therefore,  profit is not the same as cash. Your profits—instead of going directly into your pocket—are more likely to  help you grow your business by paying off debt, investing in store essentials and expanding your  inventory.   You’ll see how profit or loss affects your overall economic picture. Profit Management—The Income Statement statement. This statement reports the financial accomplishments of your store over a period of time,  usually a year. It includes gross sales, related expenses and resulting net profit (or loss) for a selected  period of time, as shown in the chart below. For a Period: TOTAL SALES                            1,000,000 COST OF GOODS SOLD                 – 700,000  GROSS MARGIN                                 300,000 TOTAL OPERATING EXPENSES       – 280,000  OPERATING PROFIT                                20,000 OTHER INCOME (EXPENSES)             – 10,000  PROFIT (LOSS) BEFORE TAX                  10,000 INCOME TAX                                     –       2,000      NET PROFIT                                             8,000 As you know, the last line of your income statement will show either a profit or loss. In this example, The 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/20/2010 for the course FIN 45635 taught by Professor Gaurang during the Spring '10 term at Birla Institute of Technology & Science.

Page1 / 4

Reading Material_ Bottom Line (RMM) -...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online