2.3.1 profit Flashcards
what is the definition for profit?
profit is the income remaining after selling all expenses
what is the calculation for profit?
total revenue - total costs
what is a statement of comprehensive income?
a formal financial document that summarises a business’ trading activities and expenses to show whether it has made a profit or loss
what are the three types of budgets?
- gross profit
- operating profit
- profit of the year ( net profit)
what is the calculation for gross profit?
sales revenue - cost of sales
what is gross profit?
gross profit is a company’s profit before operating expenses
what is operating profit?
a profit from business operations before deduction of interest and taxes
how do you calculate operating profit?
gross profit - expenses
how do you calculate profit of the year?
net profit
operating profit - interests
what is profitability?
profitability measures the financial performance of a business by comparing profits to a second variable
what are three profitability ratios?
- gross profit margin
- operating profit margin
- profit of the year margin
( net profit)
what is gross profit margin?
is a useful indicator for analysing how a business performed. does not take into account indirect costs
how do you calculate gross profit margin?
gross profit
____________ x 100
revenue
what is operating profit margin?
more accurate evidence of performance, as it takes into account direct and indirect costs.
how do you calculate operating profit margin?
operating profit
_____________ x 100
revenue
