2.3.1 Profit

Question 1

Profit

Answer 1

Surplus of revenue when costs are covered

Question 2

Gross profit

Answer 2

Profit a company ,ales after deducting the costs associated with making and selling its products, or the costs associated with providing its services

Question 3

Operating profit

Answer 3

Records how much profit has been made in total from the trading activity of the business before any account is taken of how the business is financed

Question 4

Statement of comprehensive income

Answer 4

A formal financial document that summarises a business trading activities and expenses to show wether it has made a profit or loss

Question 5

Profit margin

Answer 5

Tells the business just what percentage of its turnover is actually profit

Question 6

Profit =

Answer 6

Total revenue - total costs

Question 7

3 types of profit are

Answer 7

Gross, operating and profit for the year

Question 8

Sales revenue =

Answer 8

Quantity sold x selling price

Question 9

Cost of sales

Answer 9

Costs directly linked to the production of the goods or services sold eg raw material

Question 10

Gross profit =

Answer 10

Sales revenue - cost of sales

Question 11

Other operating expenses

Answer 11

All other costs associated with the trading of the business eg salaries and marketing expenditure

Question 12

Operating profit =

Answer 12

Gross profit - operating expenses

Question 13

Profit for the year (net profit) =

Answer 13

Operating profit - interest and taxation

Question 14

Gross profit margin

Answer 14

Is a measure of a firms profitability by looking at the relationship between gross profits and sales revenue

Question 15

Gross profit margin =

Answer 15

Gross profit / sales revenue x 100

Question 16

A low GPM means

Answer 16

Sales revenue is declining and more is needed to be paid towards costs of sales, business isn’t managing costs effectively such as costs of raw materials

Question 17

Operating profits margin

Answer 17

Is a measure of a firms profitability by looking at the relationship between operating profit and sales revenue

Question 18

Operating profit margin =

Answer 18

Operating profit / sales revenue x 100

Question 19

If OPM is falling this means

Answer 19

Business isn’t managing expenses effectively, sales are in decline

Question 20

Profit for the year

Answer 20

A measure of a firms profitability by looking at the relationship between origin for the year and sales revenue

Question 21

Profit for the year margin =

Answer 21

Profit for the year/ sales revenue x 100

Question 22

If profit for the year margin is falling this means

Answer 22

Gross profit or operating profit in decline, interest rates or taxation has changed

Question 23

Ways to improve profitability

Answer 23

Sell the same amount at higher price, sell more at the current price, sell the same at the same price but cut costs

Question 24

Profit calculation =

Answer 24

Sales - variable costs - fixed costs

Question 25

Cash flow calculations =

Answer 25

Cash inflows - cash outflows

Question 26

Two differences between profit and cash flow

Answer 26

Timing differences - cash isn’t received straight sway. The way that fixed assets are accounted for