A fishing & hunting lodge’s financial reports are like a blood pressure reading for its owners, showing whether or not the business is in good financial health.
The percentage of sales method is a type of financial statement analysis in which all expenses are expressed as a percentage of sales (revenue). In other words, financial statement line items such as cost of goods sold & supplies, wages, advertising and net income, are each calculated as a percentage of revenue.
Owners & lenders can use these percentages to track trends. For example, if the cost of goods sold & supplies percentage increased 30 to 40 percent next year, the owner would have to examine why their operating costs are increasing relative to revenue. The goal for owners is to ensure costs increase proportionately to revenues.
With this information, an owner can look further into expenses and implement effective cost cutting procedures where appropriate. Owners should perform this analysis on each expense item to track their business’ financial progress year over year.
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