2.3.1- Profit Flashcards
1
Q
Gross Profit Margin formula
A
gross profit/ revenue x 100%
gross profit = revenue - cost of sales
2
Q
Operating profit margin formula
A
operating profit/ revenue x 100%
operating profit = gross profit - other operating expenses
3
Q
Types of profit
A
- gross profit
- operating profit
- net profit
4
Q
How can profit figures be interpreted
A
gross profit- the performance of a business
net profit- how well a business control its expenses
5
Q
Profit compared to cash
A
profit:
- recorded straight away
- business can trade for many years without making a profit
- to improve profitability a firm must decrease its costs or increase revenue
cash:
- not recorded until it is paid out or received
- a profitable business may go bust if it cannot pay suppliers or wages of staff
