2.4 Making financial decisions

Question 1

Gross profit

Answer 1

Gross profit= sales revenue- cost of sales

Question 2

Net profit

Answer 2

Net profit= gross profit- other operating costs

Question 3

What is profit margin and the equation.

Answer 3

Profit margin is the profit made as a proportion of sales revenue.
Gross profit margin %= gross profit
——————- x 100
Sales revenue

Question 4

What is net profit margin

Answer 4

Net profit margin% = Net profit
—————- x100
Sales revenue

Question 5

What is the average rate of return?

Answer 5

ARR%= Average annual profit (total profit/ no. of years)
—————————————————————- x100\
Cost of investment

its the potential profit that an investment would make.

Question 6

What are the uses of quantitative data

Answer 6

• Monitor business performance
• Compare with competitors
• anticipate customer needs
• Make business decision

Question 7

Limitations of quantitative data

Answer 7

• historical/out of date
• requires reasons for numbers
• Manipulated statistics
• Qualitative data is also required.