2.4 definitions Flashcards
Average rate of return
The average rate of return compares the potential profitability of different investments.
Cost of sales
The direct costs of purchasing raw materials and manufacturing finished products.
Inflation
The profit that a business makes after deducting the costs associated with making and selling its products, or the costs associated with providing its service.
Gross profit = sales revenue - cost of sales
Inflation
The general increase in prices over time
Infographic
(Information - graph
A graphic representation of information to make it interesting and easy to understand.
The following graphs are popular when analysing financial and marketing data:
Net profit
The amount of profit left over after all other indirect costs have been taken away from gross profit.
Net profit margin (NPM)
The difference between sales revenue and total costs. Shown as a percentage.
Operating costs
Also known as Indirect costs or fixed costs, they are the costs that are not directly related to operations, or cost of goods sold.
Profitability
The measure of profit or financial gain a business activity yields
Profit margin
A measure of profitability calculated as a percentage of revenue.
Sum invested
The cash put at risk when investing in new equipment or a new product.
Variable (in relation to graphs and charts
A quantity used in a calculation or some measurable piece of information.
AAR calculation
average annual profit / cost of investment x 100
gross profit
profit a firm makes after the cost of the product
gross profit calculation
sales revenue - cost of sales
net profit
profit a firm makes when all expenses are taken into account
net profit calculation
gross profit - operating expenses and intrest
gross profit margin
fraction of every pound spent by customers that does’t go towards making the product
gross profit margin calculation
gross profit / sales revenue x 100
net profit margin
fraction of every pound that the company keep
net profit margin calculation
net profit sales / sales x 100
average annual profit calculation
total profit / number of years
