2.3 Managing finance Flashcards
What is gross profit
shows what is left after taking away the costs directly involved in making product/ providing service
Give the formula for gross profit
gross profit = total revenue - cost of sales
What is cost of sales
costs directly associated with making a product (e.g. materials)
What is profit
difference between revenue of a business and costs generated by business during a period of time
Give the formula for operating profit
operating profit = gross profit - fixed overheads
Give the formula for operating profit
operating profit = gross profit - fixed overheads
Give the formula for net profit (profit for the year)
net profit = operating profit - (net financing cost and corporation tax)
What is net financing cost
income from interest on bank deposits
Name 2 ways a business can improve profit
-increase revenue
-reduce costs
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Give the formula for profit
profit = total revenue - total costs
What is a statement of comprehensive income
document produced by public limited companies that shows revenue, break-down of different types of cost, different types of profit for a year
What is profitability
states profit as a % of sales revenue
What is gross profit margin
shows gross profit as a % of sales revenue
Give the formula for gross profit margin
gross profit margin = gross profit/ sales revenue x100
Give the formula for operating profit margin
operating profit margin = operating profit/ sales revenue x100
Give the formula for gross profit margin
gross profit margin = gross profit/ sales revenue x100
Give the formula for net profit margin
net profit margin = profit for year (net profit)/ sales revenue x100
Name 2 ways to improve profitability
- increase selling price
- cut costs