2.3.1 profit

Question 1

definition of profit

Answer 1

the money left over after all costs have been accounted for

Question 2

gross profit formula

Answer 2

gross profit = revenue - cost of sales

Question 3

operating profit formula

Answer 3

operating profit = gross profit - operating expenses

Question 4

net profit formula

Answer 4

net profit = operating profit - interest

Question 5

gross profit margin formula

Answer 5

gross profit margin = (gross profit / revenue) x 100

Question 6

operating profit margin formula

Answer 6

operating profit margin = (operating profit / revenue) x 100

Question 7

net profit margin formula

Answer 7

net profit margin = (net profit / revenue) x 100

Question 8

how to improve profitability

Answer 8

increase prices

reduce variable costs (packaging, stock, new suppliers)

reduce expenses (relocate, replace inefficient fixed assets)

reduce one-off costs and interest (delay capital spending, lease fixed assets, zero budgeting)