5 Calculating Revenue, Costs and Profit 37

Question 1

Why is Profit important ?

Answer 1

Profits are important for the following reasons:

• The provide a measure of success of the organisation
• Profits are the best source of capital for investment in the growth of a business
• They act as a magnet to attract further fund from investors

Question 2

Has is the formula to calculate the Sales Revenue?

Answer 2

Sales Revenue= Volume of goods Sold x Average selling Price

Question 3

What are the reasons a manager would need to be aware of the costs ?

Answer 3

• They need to know the cost of production to assess whether it is profitable to supply the market.
• They need to know actual costs to allow comparisons with their forecasted figures