2.3.1 Profit Flashcards
What are profits?
A business’ profit is total costs - total revenue
What is the formula for gross profit?
Gross profit = Revenue - Cost of sales
How can revenue be calculated?
Price x quantity of sales
What are gross profits?
Profit made by a business after direct costs are met.
What is operating profit?
Operating profit is the difference between gross profit and business overheads.
What is the formula for operating profits?
Operating profit = Gross profit - Operating expenses
What is Net profit?
Net profit is profit made by the business for the year.
What is the formula for net profit?
Net profit = Operating profit - Interest (and exceptional costs)
What is a profit and loss account?
This shows the income and expenses of a business during the financial year.
What is a Gross profit margin?
A Gross profit margin shows the gross profit made on sales turnover/revenue
How is a Gross profit margin calculated?
Gross profit margin = Gross profit/revenue x 100%
What is an Operating profit margin?
An operating profit margin shows the operating profit made on sales revenue.
What is the formula for an Operating profit margin?
Operating profit margin = Operating profit/Revenue x 100%
What is a Net profit margin?
A Net profit margin takes into account all business costs.
What is the Net profit margin formula?
Net profit margin = Net profit before tax / Revenue x 100%
