2.4 Flashcards
2.4: Sales revenue
Price x quantity sold
2.4: Variable costs
Cost of each product x numbers sold
2.4: Total costs
Total costs =
Fixed costs + Variable costs
2.4: ways a business can increase profit
- increasing revenue
- Lowering costs
2.4: Gross profit
Gross profit = sales revenue - variable cost
GP = SR - VC
2.4: Net profit meaning
The amount of money left over once all the expenses have been deducted.
2.4: Net profit formula
NP = SR - TC
Net profit = sales revenue - total costs
NP = SR - (FC + VC)
2.4: Gross profit margin and Net profit margin
GPM = GP/SR X 100
NPM = NP/SR X 100
2.4: Average rate of return meaning
When a business wants to decide between two or more projects they find out which one will make more profit.
2.4: Average rate of return
Total profit / number of years (average annual profit /
Cost of investment
x 100
2.4: Businesses use a variety in order to make and justify decisions.
These include:
- information from graphs and charts
- market data
- marketing data.
- financial data
2.4: Bar charts and graphs in general
They present information clearly in a way that makes it easy to understand.
You can interpret trends over time, or one data set with another such as comparing the sales figures of two rival businesses, or sales over a few years.
Can identify seasonal trends and variations.
Many businesses also use infographics to make info more visual.
2.4: pie chart
A pie chart shows different parts of a whole. E.g. a pie chart that shows how the market share of each car manufacturer
You can interpret direct rivalries or relative successes.
2.4: Scatter/line graphs
Useful in demonstrating the relationship between two variables.
E.g. the relationship between how much a business spends on advertising and it’s sales revenue.
2.4: Using and interpreting market data
Market data is data relating to the characteristics of the market in which a business operates. This might be the general market in a country or countries, or including demographic information such as population change, average income, migration and unemployment rates.
Market data can also refer to markets for specific products, such as cosmetics or food. This kind of market data can include data on a market size (for example the number of products sold or totl revenue in that market), the number of competitors the market and the average price data.
Market data can help inform a business about a new opportunity and areas of potential growth. A business will use this information to make decisions and justify them. For example, it could use market data to decide the location its next store or make decisions about the quantity of product that it produces.
