34 Profit

Question 1

Define gross profit and how is it calculated

Answer 1

gross profit is the profit made by a business after direct costs have been met.

revenue - cost of sales

Question 2

Define operating profit and how is it calculated

Answer 2

operating profit is the difference between gross profit and business overheads/operating expenses.

gross profit - operating expenses

Question 3

Define net profit and how is it calculated

Answer 3

net profit is the profit made by the business for the year. It is the difference between operating profit and finance costs.

operating profit - finance costs

Question 4

What are ways to improve profit

Answer 4

• raise or lower costs per unit to increase profitability.
• adjust marketing strategy for
  brand awareness.
• finding new markets by diversifying or
  selling online.
• merging or takeovers that can lower unit costs and increase profit.

Question 5

Define revenue

Answer 5

revenue is the amount of money a business receives from selling its output.

Question 6

Define statement of comprehensive income

Answer 6

statement of comprehensive income is a document that shows key information relating to the financial performance of the business.

Question 7

How to calculate margins, for example gross profit margin

Answer 7

gross profit margin = gross profit/revenue x100

Question 8

Define cost of sales

Answer 8

cost of sales are the direct costs of a business.

Question 9

Define amortisation

Answer 9

amortisation is the writing off of an intangible asset.

Question 10

Define exceptional costs

Answer 10

exceptional costs are a one off cost, such as a large bad debt