Financial Planning

The global increase in trade and foreign investments has led to inter-connection of many national economies. This and the resulting fluctuations in exchange rates, has created a huge international market for Forex, opening up another exciting avenue for trading. The Forex market offers unmatched potential for profitable trading in any market condition or any stage of the business cycle.

Analysis of Key Line items of the P&L Statement Sales

The income generated by a company from sale of goods or services after the deduction of returns, allowances for damaged or missing goods and any discounts allowed. The sales number reported on a company’s financial statement is a net sales number, reflecting these deductions.

Raw Material Cost

This is the cost of direct materials required to produce the volume of goods sold. Trading goods represent goods purchased to manufacture finished products. In the P&L, trading goods form a component of raw material cost. For any company, the cost of these goods should not exceed 30% of the raw material cost. However, distribution companies are an exception and the cost of trading goods is usually a high percentage of raw material cost.

Depreciation Cost

These allocate the cost of an asset over its useful life. For example, if a company buys a machinery for Rs. 100,000 and expects it to have a useful life of 10 years, it will be depreciated over 10 years. Every accounting year, the company will add an expense of Rs. 10,000, which will be matched with the money that the equipment helps to make each year. IT companies usually tend to have higher depreciation rates due to lower useful life of computers.