Archive for April, 2010

Accounting 101: Gross Margin Analysis

April 19, 2010

If your gross margin were to decrease one month, that would mean your cost of goods sold increased in relation to your sales… you want to find out why – you cannot fix a problem if you do not know why it occurred – you could end up making it worse by fixing the wrong problem

  • Sold less, meaning you bought less – so you could not take advantage of volume discounts from supplier
  • Sold more, but supplier cost increased and/or no volume discounts
  • Sold at a discount, without a discount on purchase

Accounting 101: Income Statement:

April 2, 2010

shows the financial condition of your business over a period of time and is a useful tool for managing your business; it will give you clues about trends in your sales, costs and expenses.

It will help you make decisions to improve your operations.

It will help you to understand where to focus your energies – increasing sales, reducing costs or both.

Variable Expenses – those expenses that vary in direct proportion with sales

  • Raw materials · Direct labor

  Fixed Expenses – those expenses that you have regardless of sales

  • Rent · Insurance · Salaries