Statement of Profit and Loss
This financial statement shows a bank’s income, expenses, and net profit for a period.
the Statement of Profit and Loss
Costs that do not change with the level of output.
fixed costs
Profit before interest and tax divided by revenue.
the operating profit margin
Difference between interest income and interest expense.
Net interest income
Financial statements prepared for internal management decision-making.
management accounts
The main purpose of the profit and loss statement is to show this.
Financial performance
Costs that vary directly with production volume.
variable costs
Current assets divided by current liabilities.
the current ratio
This ratio measures bank profitability compared to total assets.
Return on Assets (ROA)
The process of matching the cash book balance with the bank statement.
bank reconciliation
The profit and loss statement usually covers this period.
Financial year (or accounting period)
Costs that have already been incurred and cannot be recovered.
sunk costs
A ratio measuring a company’s ability to meet short-term obligations.
liquidity ratio
This ratio shows profit earned on shareholders’ equity.
Return on Equity (ROE)
The financial statement that shows assets, liabilities, and equity at a specific date.
the statement of financial position (balance sheet)
This figure is calculated as total income minus total expenses
Net profit
A budgeting method that starts from zero each period.
zero-based budgeting
Total liabilities divided by shareholders’ equity.
the gearing ratio
Net interest income divided by average earning assets.
Net Interest Margin (NIM)
A system where every transaction affects at least two accounts.
double-entry bookkeeping
Taxes deducted from profit before tax result in this final amount.
Profit after tax
The point where total revenue equals total costs.
the break-even point
Current assets minus inventory divided by current liabilities.
the quick ratio (acid-test ratio)
This ratio compares operating expenses to operating income in a bank.
cost-to-income ratio
An expense recognized even if cash has not yet been paid.
an accrued expense