| Sl | Terms | Details | Example |
| 1 | Revenue | The total amount of sales made by a company during a given quarter/year. | No. of Cars sold = 100
Price of each Car = Rs.1,00,000
Revenue = Rs.1,00,00,000 |
| 2 | Expenses | How much the company spent for producing the goods (manufacturing, transport, human resources, rent) that were sold in that quarter/year. | No. of Cars sold = 100
Price of producing 100 Cars i.e.
Expenses = Rs.40,00,000 |
| 3 | Operating profit | The amount you get after deducting the expenses (used only for the company’s operations) from the revenue in that quarter/year. | No. of Cars sold = 100
Revenue = Rs.1,00,00,000
Expenses = Rs.40,00,000
Operating profit = Rs.60,00,000 |
| 4 | Profit margin | Compare this margin with its previous quarter/year to understand how well the company has been using its resources to generate profits | No. of Cars sold = 100
Revenue = Rs.1,00,00,000
Expenses = Rs.40,00,000
Operating profit = Rs.60,00,000
Operating profit margin
= (Operating profit/Revenue) x 100
= 60% |
| 5 | Interest | If a company has taken debt, assess the interest section. Compare with the previous quarter/year to check if it has increased or decreased. Higher the interest, higher the debt— impacting its profits. | Loan taken by the company = Rs.50,00,000
Rate of interest = 10%
Interest = Rs.5,00,000
Operating profit becomes = Rs.55,00,000 |
| 6 | Depreciation | This is the non-cash expense that means reduction in the value of a company asset over time. The company buys a Cars manufacturing machine | Price of the machine = 20,00,000
Lifespan = 10 years
Depreciation per year = 10%
Depreciation per year = Rs.2,00,000
Operating profit becomes = Rs.53,00,000 |
| 7 | Tax | This is the amount of income tax payable
by the company on its earnings. | Operating profit = Rs.53,00,000
Tax rate = 30%
Tax liability = 30% x Rs.53,00,000
= Rs.15,90,000
Net profit = Operating profit – Tax liability
= Rs.37,10,000 |
