COMMERCE 1AA3 Lecture Notes - Lecture 1: Gross Profit, Inventory Turnover, The Royal And Ancient Golf Club Of St Andrews

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 1AA3
• Professor: Emad Mohammad

Document Summary

Merchandising and manufacturing vs. service: merchandising and manufacturing, sales revenue, cost of goods sold, gross profit, operating expenses, service, service revenue, operating expenses. Income before taxes = income from continuing operations. Users of accounting information would like to make forecasts about future earnings. To forecast expenses, you need to understand how they are related to sales. The stronger correlation the easier it is to forecast the change in one item knowing the change in the other. Cogs has the strongest correlation with sales, and thus the easiest to forecast given a sales forecast. Operating expenses are strongly correlated with sales, and thus are easy. Other revenues and expenses have the weakest correlation with sales, and thus are somewhat difficult to forecast. Inventory is an asset held for resale or used to produce services and goods for sale: merchandising firms have only merchandise inventory, manufacturing firms have three types of inventory, raw materials, work in process, finished goods.