A useful measure of a company"s ability to generate profit is the net profit margin (sometimes called return on sales). Net profit margin shows the percentage of profit in each dollar of sales: Net profit margin = net income sales revenue. Two categories: total revenues and total expenses. Gross profit (margin) = net sales cost of sales. Income from operations = gross margin operating expenses. Net income = income from operations plus/minus non-operating revenues and expenses. Reports the financial position of a company at a specific point in time. Classified means it reports resources and groups that have claims to resources. Basic classification is between current vs. non-current items. Reasonable to designate one year (or the operating cycle) as the dividing line between. The operating cycle is the average time that it takes to purchase goods or services, resell the goods or services, and collect the cash from customers. Reports changes in cash for a given period.