2.3.1 - Profits Flashcards
How is profit calculated?
Profit = total revenue - total costs
What are the three types of profit?
- gross profit
- operating profit
- profit for the year
What is a statement of comprehensive income?
Financial document that summarises a business’ trading activities and expenses to show whether its made a profit or a loss
What is sales revenue?
Money coming in from sales
What is cost of sales?
Costs directly linked to production
E. G. raw materials
What is cost of sales?
Costs directly linked to production
E. G. raw materials
What is gross profit? (calculation)
Sales revenue - cost of sales
What are Other Operating Expenses?
Other costs associated with the trading of the business
E. G. Salaries
What is operating profit? (calculation)
Gross profit - expenses
What is interest and taxation?
Interest paid on debt or received plus tax payable of profit
What are exceptional items?
Any unusually large or infrequent transactions
What is net profit (profit for the year)?
calculation
Operating profit - interest and taxation
What does profitability measure?
The financial performance of a business by comparing profits achieved to a second variable
E. G. Revenue
What are the three profitability ratios?
- gross profit margin
- operating profit margin
- net profit margin
What does GPM measure?
A firms profitability by looking at the relationship between gross profit and sales revenue
