2.3.1 Profit (SoCI) Flashcards
How do you calculate gross profit ?
Sales revenue - cost of sales
How do you calculate operating profit
Gross prof - expenses
How do you calculate net profit
Operating profit - interest and taxation
What is GPM
Measure of a firms profitability by looking at the relationship between gross profit and sales revenue
How is GPM calculated
Gross prof / sales revenue x 100
What is Operating profit margin
This is a measure of a firms profabitlity by looking at the relationship between net profit and sales revenue
If the OPM is low , what may this indicate ?
Not managing expense effectively
Wages are going up
How do you calculate OPM?
operating profit / sales revenue x 100
What is net profit margin ?
This is a measure of the firms profitability by looking at the profit for the year and sales revenue
How is net profit margin calculated ?
Profit for the year / sales revenue x 100
What are some ways to improve profitability ?
- Sell the same amount of product but at higher price
- Change suppliers to have lower raw material costs
- Sell more at the current price
