Revenue, margins, profit and cash
Read an income statement from top to bottom and tell accounting profit apart from cash.
Module 7 of 26, Reading a company’s numbers. Lesson 2 of 6, about 16 minutes.
The takeaway
Profit on paper and cash in the bank are not the same thing. In the exercise, gross profit is $40 on revenue of $100, a 40% gross margin, but return on cost is $40 divided by $60, about 67%: the two ratios differ because they divide by different amounts. Read both the income statement and the cash flow statement, and watch margins over time, not just one number.
This page is a public summary. The full lesson has the worked examples, an interactive exercise and a short quiz, and sits in the course. Lessons 1 and 2 of Module 1 are free and the rest need a pass.
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