2.3.1 profit Flashcards
profit
the reward for taking risk and making reward
profit formula
total revenue - total costs
profit in absolute terms
monetary value of profits earned (£)
profit in relative terms
profit earned as a % of sales achieved or investment made
gross profit formula
revenue - cost of sales (variable)
operating profit formula
gross profit - other operating expenses
net profit formula
operating profit - (net finance costs + taxes)
revenue
sales over a period of time
gross profit
difference between revenue and cost of sales
administration expenses
operating costs and expenses that are not direcly related to producing the goods or services
cash flow
difference between total cash inflows and total cash outflows
how to increase profit
- increase quantity sold
- increase selling price
- increase production output
- reduce fixed costs
- reduce product range
ratio analysis
analysing the relationships between financial data to assess the performance of a business
3 profitability ratios
- gross profit margin
- operating profit margin
- net profit margin
gross profit margin formula
gross profit / revenues x100
