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Using Income Statements to make Decisions | Business Studies for GCSE/IGCSE - Year 11 PDF Download

Using Income Statements in Decision-Making

  • Income statements provide managers with insights into whether the business is profitable or experiencing losses. They facilitate performance comparisons with previous years, aid in forecasting future outcomes, and enable benchmarking against competitors.
  • Finance managers can analyze the data to implement advantageous modifications or establish fresh strategic goals.

Example: Chillies Cafe

  • Chillie's Cafe is a popular spot in central Berlin that specializes in selling cold drinks during the summer season.
  • Its two top-selling products are bubble tea and smoothies.

Diagram: BubbleTea versus Smoothies

Using Income Statements to make Decisions | Business Studies for GCSE/IGCSE - Year 11

Although Chillie's sells bubble tea at a higher price, smoothies are more profitable due to higher revenue.

  • There are fewer sales of bubble tea compared to smoothies, resulting in lower overall revenue.
  • The cost of sales for bubble tea is higher than that of smoothies.

Questions to Consider when Analyzing the Income Statement

Using Income Statements to make Decisions | Business Studies for GCSE/IGCSE - Year 11

Question for Using Income Statements to make Decisions
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What is one of the benefits of using income statements in decision-making?
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