Finance - Financial statements - Income statement

7 important questions on Finance - Financial statements - Income statement

Why is it important to maintain revenue streams?

If these companies are too rigid, they become chased by new innovations

What are the cost of good sold (COGS)/direct costs?

All the business expenses directly related to producing or delivering the product
Examples
  • Raw material
  • Direct labor
  • Packaging
  • Advertising

What are the operating costs (indirect costs), give the 3 categories?

All the expenses that are not directly related to sales
  1. Sales and marketing
  2. General and administrative
  3. Research and development
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How do companies lower their operational costs?

  • (Re)organize sales via the internet
  • Simplify organizational systems

Why does the value of a fixed asset diminshes every year?

  • Through use
  • Newer technologies that are cheaper and faster
  • Maintenance cost increase

What are fixed costs?

Costs that have to be paid irrespective of sales (rent, mortgages)
  • Investments in facilities
  • Equipment
  • Basic organizations

What are the 2 pricing mechanisms?

  1. Fixed prices (predefined based on static variables: list prices, prices depending on the number or quality of a product)
  2. Dynamic prices (defined by negotiation or depend on demand and supply)

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